Do Foreclosures Get You Paid?

Our current economic situation has eliminated most of the "automatic" part of recording a lien to get a judgment paid, yet sometimes lien recordings still are (often a very long-term) a way to get a judgment paid.

During the previous decade or so, an amazing number of homeowners have either lost their houses, or are facing a chance of being forced out of their property or other real estate in a foreclosure or short sale. How does foreclosure, or other debtor sales of property, effect a judgment owner having a lien previously recorded on their judgment debtor's real estate?

When a judgment debtor gets behind on making payments on their real estate loan, that is usually not good news for creditors. Yet, occasionally the foreclosure proceeding on a judgment debtor's real estate might be good for a judgment creditor, possibly increasing the chances for a judgment to get satisfied.

An ideal scenario is when one records a judgment lien long before a debtor's property was foreclosed on, and before the mortgage lender recorded a deed of trust or mortgage. In most states and situations, first to record a lien is usually the winner, so this makes your lien ahead of the mortgage lender. Most often, on property sales or foreclosure auctions, any superior (previously recorded) liens (e.g., a judgment creditor's lien) has to be paid off first from the net proceeds of the property sale.

However, the first record their lien wins, isn't always the law. In some states, as an example Florida, things aren't always fair. I learned of a case where a judgment owner recorded statewide a fraud judgment lien on their debtor that owned bare land in Florida. A negligent lending company ignored the creditor's properly recorded prior lien, and loaned their debtor a huge construction loan to build a mansion on that raw land. After the debtor's home was almost finished, the judgment creditor began a Sheriff's auction sale, because no homestead could be declared because the property wasn't yet the judgment debtor's residence.

The Florida lending company then sued the judgment creditor to stop the Sheriff auction sale and get quiet title to the debtor's house. After a court battle, the judge hastily agreed with the lender. The judge ruled that it didn't matter that the creditor was the first to record their lien, the lending company made a loan, and they deserved to be repaid, and the lending company didn't harm the judgment owner, so that judgment owner got burned.

What if you recorded your judgment lien after the lender's mortgage or trust deed was recorded? Sometimes, real estate property which starts in a foreclosure process, never actually ends up being sold at a foreclosure auction.

Sometimes a mortgagor (your debtor) can swing borrowing money from a conventional lending company. That not only ends the foreclosure proceeding, it may also get your judgment satisfied. Most conventional lenders and banks require that all prior liens be paid off. They do this so their new loan will not be behind other lien holders. When that happens, your judgment will get paid in full or settled.

Sometimes the debtor can find sufficient money from friends, family, or by selling a few of their possessions, to bring their real estate loan current to stop the foreclosure sale. If this happens, you probably won't get paid at that time, however your lien and judgment will remain intact, allowing the future possibility of being paid.

What if your judgment lien is not in the first position, and the judgment debtor's house actually sells at an auction? If the sale price is above what is required for all liens superior to yours to get satisfied, any additional money from the sale will be paid to your judgment lien, to get you fully or partially satisfied.

Of course, if a judgment debtor's property is

foreclosed on, there's most often insufficient equity to satisfy all the liens ahead of the judgment creditor's In that case, the judgment owner's judgment lien collateral for the property will be wiped out when the sale happens, and the judgment owner won't be repaid a dollar. The creditor's judgment and unsecured lien remains, however it no longer attaches to the foreclosed property. Their lien still attaches to other properties the debtor might currently own now or in the future.

For judgment creditors with lots of assets, if a judgment debtor's property is sold by auction, in certain states and jurisdictions, the creditor might have a redemption right to purchase the foreclosed real estate after a sale at the courthouse auction, until the right of redemption time limit runs out. This only makes sense if you get instant equity from the sale, which would usually pay off the judgment.

http://www.JudgmentBuy.com - Judgment Recovery. The free, easiest, fastest, and best chance to recover your judgment money. Mark Shapiro, the judgment matchmaker. We have the best free judgment leads for judgment enforcers, judgment buyers, and contingency collection lawyers.

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