Placing a lien on real estate is an option for many unsecured creditors. Provided the debtor's state of residence allows the practice, a creditor can record a lien against the individual's home--securing the previously unsecured debt and making payment more likely.
Facts
Unless the creditor is the federal government, it must sue the consumer in his local court and obtain a civil judgment before it has permission to record a property lien. Once it has a civil judgment, it may file that judgment with the land records office in the debtor's county or the secretary of state's office. Doing so activates the lien.
Considerations
A lien gives the creditor the power to foreclose on the consumer's home, but it must pay off any previously filed liens with the sale proceeds before it receives any funds it can put toward the delinquent debt. If the value of the liens against the property exceed that of the property itself, foreclosing isn't in the creditor's best financial interests.
Effects
Although a homeowner can sell his home without first paying off the judgment lien, he can only do so if the buyer pays him in cash. In this case the lien would remain with the property until the original judgment expired. If a buyer needs financing to purchase the home, the finance company will require that the seller pay off the lien before it will agree to the new mortgage loan.
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