A judgment lien is a court-ordered arrangement in which the creditor (the person who won the judgment) can place a lien on the debtor’s (the person who owes the money) property to ensure that he or she gets what the debtor owes. A judgment lien on real property in Texas means that if the debtor cannot pay up, the creditor has the right to sell the property and use money from the proceeds to fulfill the judgment.
Each state has its own laws regarding when, why, and how one could use a judgment lien upon completion of a civil court case. Here’s how the law works in Texas.
What Is a Judgment Lien?
There are two main court systems in Texas: criminal and civil. In a criminal court case, the judge will order a guilty defendant to complete a sentence as punishment, such as jail time. In a civil court case, the goal is to compensate the victim for the losses the defendant caused through an act of negligence or intent to harm. A civil case can result in a judgment in which the defendant must pay for the claimant’s medical bills, lost wages, court costs, and other fees.
As a type of insurance to make sure the defendant in a civil case will pay the claimant, the judge might order a judgment lien against the debtor. In every state, the civil courts can attach a judgment lien on the debtor’s real estate or real property. Some states also allow judgment liens on other valuables, such as jewelry or art. In Texas, however, the law permits judgment liens on real property only. “Real property” can include a house, business, condo, and land.
A judgment lien prevents the sale of the property prior to the debtor paying the amount he or she owes. Any of the defendant’s real property might be subject to liens and seizures, other than property that’s exempt from seizure by law. Texas law is unique in that it protects a debtor’s primary residence from seizures. “Homesteads” are exempt under the Texas Property Code. Liens can remain attached to property for 10 years, making them highly effective at enforcing court-ordered judgments or settlements in Texas.
More About Real Property Judgment Liens
A creditor can request a judgment lien against a debtor by filing a judgment with the county court, in the county where the debtor keeps real property or may own real estate in the future. In Texas, the lien can attach to any real property that’s not the debtor’s primary residence, cemetery plot, college savings funds, or retirement account. Any other real estate holdings or items of value can receive liens. There are caps on the amount of money a lien can signify in Texas: up to $50,000 of personal property for an individual debtor and up to $100,000 for a family.
Once the creditor files the judgment, the debtor will have the opportunity to pay the amount that he or she owes, plus any interest. In many cases, however, debtors do not have enough to cover the entire amount of a judgment in one payment. Within 30 days of receiving the judgment, the creditor can then obtain a Writ of Execution. This is a document that gives the creditor the power to place liens on the debtor’s non-exempt properties. The document can even attach to property the debtor does not yet own.
Once the claimant or his/her attorney renders a judgment and pays the required fees, the county clerk will record judgment liens in the real property records of the county. The clerk will record the exact date, down to the hour, on which the property received the abstract of judgment. The lien will then exist for up to 10 years following this debt. If no one acts to enforce the judgment in this 10 years, the judgment can become dormant, at which point the lien will cease to exist.
What Does a Judgment Lien Mean for Real Estate?
A judgment lien is an adverse lien, meaning an involuntary lien that someone placed on the property against the owner’s will. Once there is a judgment lien on real property, the debtor cannot sell or transfer the property and keep the proceeds. If the debtor does sell the property, he or she must pay the creditor in full before the transaction can close. It is difficult to sell a piece of real estate that has a lien against it, and it is expensive to remove the lien. Therefore, placing a judgment lien on real property is one of the most effective ways to collect debts owed.
A creditor will typically try to wait until the owner decides to sell the property to collect a judgment from a lien. If the creditor tries to force the debtor to sell through a foreclosure action, the creditor is the entity that will have to make mortgage payments on the property prior to the sale. Therefore, most creditors wait until the debtor decides to sell the property. Real estate agents search public records to uncover judgment liens against a property before deciding to purchase or represent the property.
Liens are matters of public record. Anyone can find evidence of a judgment lien if he or she knows where to look. Performing an online public records search can bring up a property’s lien information in a matter of minutes. Visiting the county clerk’s office can also provide adverse lien information. With a lien so easily discoverable, it’s no surprise that property owners will do what they can to pay off debts they owe from settlements or judgments before attempting to sell their homes.
Releasing a Property Judgment Lien
Despite Texas’ homestead exemption, creditors can still place judgment liens against a debtor’s primary real estate. Texas laws only exempt primary residences from seizures, not liens. If a debtor sells a homestead with a lien, the debtor has six months to invest the proceeds into a new primary residence. Otherwise, the creditor can use the proceeds to fulfill the judgment. A judgment lien might not be able to take a home away from a debtor, but it can still prevent its sale. Therefore, to sell a piece of property that has a judgment lien against it, one must first remove or release the lien.
Effective as of 2007, Texas Property Code includes a procedure for releasing a judgment lien from real property. According to this law, a debtor must file an affidavit with the county to secure the release of a judgment lien against a primary residence. The debtor must first provide a 30-day notice letter to the creator of the judgment, containing a copy of the affidavit the debtor intends to file. The debtor should trust an attorney with these filings, as they can be complex and have strict requirements. If the debtor follows the Texas statute for releasing a lien to the letter, the debtor’s affidavit can serve as a release of the judgment lien against a homestead property.
Filing an affidavit in the real property records in the correct county that complies with Section 52.0012 of the Texas Property Code is no easy feat. It’s always best to trust an attorney with this process. If the creditor disputes the status of the real property as a homestead, the debtor may need to provide evidence that proves the status. If the property in question is not the debtor’s primary residence, he or she might not be able to release the judgment lien.