Now that the housing market is coming back, and home equity has returned for many, judgment liens have once again become an issue.
What is a Judgment Lien?
A judgment lien is a judgment that was entered against you for a debt owed, which has been recorded with the county recorder, making it a lien on your property owned in that county. For example, let’s say that during the recession you defaulted on a personal loan and ended up with a judgment against you for $20,000. If the plaintiff in that lawsuit recorded the judgment with the county recorder, it became a lien on your real estate in that county.
How Does a Judgment Lien Affect You?
A judgment lien can affect you in a few different ways. First, it’s a lien on any property that you own in the county the lien is recorded in. This lien may show up on credit searches and other reports. Second, it can be an obstacle when you go to refinance or sell the property. If you’re refinancing, the new lender will usually want you to deal with the lien. This typically means paying/settling or otherwise getting it removed. When selling the house, the judgment lien will need to be paid before you get paid any proceeds.
Judgement Lien Priority & Foreclosure
Liens on property in Arizona have a certain priority or hierarchy. The priority is usually in the order it was recorded, with few exceptions. In a typical scenario where you have a 1st mortgage and 2nd mortgage, the judgment lien will be in 3rd priority. It may also be inferior to an HOA lien and tax lien if that applies. But don’t mistake the lower priority of a judgment lien for a lack of power to adversely affect you. A judgment lienholder can still foreclose on your property. They have to satisfy the senior lienholders, but they can still initiate a foreclosure proceeding if they want to.
So now that there is more equity in properties, this possibility can become very real.
Homestead Exemption for Judgment Liens
For homeowners that meet the definition of the Arizona Homestead Exemption, there is an exemption for your personal residence that protects the first $150,000 in equity from judgment lienholders. To read more about the Arizona Homestead Exemption, click here.
How Long Does a Judgment Lien Last?
Judgment liens have to be renewed every five years. But if they are properly renewed, they can be extended almost indefinitely. The process for renewal is very tedious and often lienholders don’t follow the procedure correctly. This can create a defense to the judgment lien and should be evaluated by a debt attorney. To read more about judgment renewals, click here.
How Can I Remove a Judgment Lien?
If you’ve read this far and you have a judgment lien issue, you’re probably wondering how to remove a judgment lien in Arizona. Fortunately, there are at least 4 ways to remove a judgment lien in Arizona. To read more about those options, click here.