Should You Foreclose on a Property with a Judgment Lien?

 Posted on January 27, 2020 in Debt Collection

An unsecured creditor can secure their claim on a debt by receiving a judgment lien. If a court finds in favor of the creditor in a lawsuit, the creditor can request that a lien be put on the debtor’s property – most often their home. If the debtor tries to sell the house, the buyer or seller must pay the lien before ownership can be transferred. The lien would also make them a junior creditor if another creditor foreclosed on the property. As a creditor with a judgment lien, you may wonder whether you can initiate a foreclosure on the property. While you do have that right, there are several reasons why foreclosing on a judgment lien may not be worth your effort:

Sale Process: Forcing a sale on a home will cost both time and money. You will need to publish a listing of the sale and pay a fee to the local sheriff’s department to hold the property. You will also need to hire a real estate attorney to ensure that the sale is legal. Once you are able to sell the property, you will be required to give the debtor time to repay the lien. The whole process could take the better part of a year, with no guarantee of success.

Homestead Exemption: Each state offers a homestead exemption to protect a homeowner’s equity in their primary residence. In Illinois, the exemption is $15,000 for a single person and $30,000 for a married couple. This means that the first $15,000 or $30,000 from the foreclosure sale will go back to the debtor. You will get nothing out of foreclosing on a home if the debtor’s equity is less than the exemption.

Other Claims: In many cases, the debtor is already paying a mortgage on the property. If you force a foreclosure on the property, the mortgage creditor would have priority over you in being reimbursed by the sale proceeds. This adds another threshold beyond the homestead exemption that you must surpass before you can collect money from the sale.

Bankruptcy: Foreclosing on the home may compel the debtor to file for bankruptcy, providing various protections to the debtor and putting you at a disadvantage when compared to other secured creditors.

Contact an Illinois Creditor’s Rights Lawyer

A judgment lien is just one means of enforcing a debt judgment after filing a successful lawsuit against a debtor. A Chicago debt collection attorney at Dimand Walinski Law Offices, P.C., will suggest the enforcement mechanism that best suits your needs. Schedule a consultation by calling 312-704-0771.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2017&ChapterID=56&SeqStart=79200000&SeqEnd=86200000