An unpaid judgment can become a lien on real estate in Illinois. A judgment lien enables a creditor to compel the selling of a debtor's property. The proceeds from the property sale are then used to satisfy the judgment. Also without a judgment lien, a claimant may petition the court to have the property sold by the sheriff. The creditor must file those papers with the county recorder's office in order to obtain a judgment lien.
If the property is a primary residence, the Homestead Exemption makes it more difficult for a creditor to foreclose, even if they have a judgment lien. And if the property has been sold, the debtor can be able to reclaim the home by paying a fee.
In this article, we discuss judgment liens on properties and answer questions including:
- Judgement Lien's Consequences
- Lien Foreclosing on Illinois Property
- Notification and Sale of Judgement Liens
- Rights of Redemption of Judgement Liens
- Motion for Turnover with Judgement Liens
- The Exemption for Homesteads
Judgement Lien's Consequences
A lien is a legal document that is attached to real estate. A court judgment must be recorded with the Recorder of Deeds in the county where the property is located in Illinois before it can be enforced. Even if the property is situated in the same county as the judgment, the creditor must record the judgment. A creditor with a judgment lien may then be able to compel the sale of the property in order to satisfy the judgment. They have the power to do this even if the debtor owes money to other creditors.
If the creditor does not compel a sale, the lien stays in place for 7 years. This means the debtor won't be able to sell the property during this period because a buyer will expect him/her to pay the judgment in full before deciding to buy it. The creditor can also extend the lien, for a total of 21 years. The creditor may sue to enforce the judgment lien after it has been recorded with the county's Recorder of Deeds. The process of enforcing or foreclosing on a judgment lien is similar to that of a mortgage foreclosure.
Lien Foreclosing on Illinois Property
If the creditor wishes to enforce the judgment lien, he/she will conduct a title check to see if the property has any other liens. The holders of such liens will be listed as defendants in the foreclosure complaint so that their cases can be resolved.
After filing with the court, the creditor must serve a summons and a copy of the complaint on all defendants. The following should be included in the complaint:
- Details about the decision liens
- A filing for a foreclosure judgment
- A offer for the property to be sold at a judicial auction, plus costs
- A copy of the original judgment that was used to secure the property lien.
- A note about the six-month redemption period after the transaction.
Defendants have just 30 days to answer from the day they are served. The court may enter a default judgment against the debtor if he/she does not respond.
A notice of foreclosure should be filed with the county's Recorder of Deeds by the creditor. This informs the public of the litigation involving the property's title. It also prevents any unidentified creditors from seeking the proceeds of the foreclosure sale. A notice of the foreclosure action will also be released once a week in the local newspaper for three weeks in a row, at least 30 days before the court issues a judgment of foreclosure.
Because of the property transfer, the lien is terminated if the court issues a foreclosure judgment. As mentioned below, the original owner still has one last opportunity to reclaim the property.
Notification and Sale of Judgement Liens
Any planned real estate sale must include notification to the debtor by a creditor. The notice of sale, like the notice of foreclosure, must be published in a local newspaper. The first notice must be published 45 days before the property sale, and the last notice must be published at least 7 days before the sale. The notice will be published in the real estate section of the newspaper, in the legal notices section. A notice should also be placed in three public locations in the county, most commonly the sheriff's office and the courthouse. The notice must include the sale's date, place, and time. It must also include the names of the borrower and the debtor.
A public auction will be held for the foreclosure sale. The court will issue an order authorizing the sale and payment of all costs and expenditures after the auction. The sheriff would then present the buyer with a Certificate of Sale. The selling proceeds will be distributed to the creditors in order of priority. If there is some money left over after the creditors have been paid, it will be returned to the former owner. The redemption period will end on the date specified in the court order authorizing the transaction. The redemption period is the last opportunity for the debtor to reclaim the property.
Rights of Redemption of Judgement Liens
Even if the creditor has forced the sale of the home, the debtor has the right to buy it back. He/she has six months from the date of sale to do so. The debtor must pay the price the buyer paid for the property plus 10% interest to reclaim the property. The borrower or buyer receives these assets. The former debtor would get a redemption certificate, which he/she could file with the county's Recorder of Deeds. The redemption certificate cancels the sale and makes the property recovery official.
Motion for Turnover with Judgement Liens
As previously stated, a creditor may petition the court to have the property sold by the sheriff without a judgment lien. To satisfy a judgment, a judgment creditor may file a Motion for Turnover of Real Property. If the court grants the motion, the property will be turned over to the sheriff for sale without the cost or delay of a mortgage or lien.
Turnover motions are rarely used and must meet the following criteria:
The equity interest must be greater than the judgment debt. The term "equity interest" refers to the difference between the value of the home and the amount owed on it. If the house is worth $100,000 and the debtor owes $70,000 on the mortgage, the equity interest is $30,000.
Before holding any proceeds from the sale, the creditor must repay any mortgages on the property.
If the property being turned over is a primary residence, the debtor is eligible for the Homestead Exemption.
The Exemption for Homesteads
If the equity interest in the primary home is less than the exemption amount in Illinois, the Homestead Exemption prevents the primary home from being sold to fulfill the lien.
The exemption is worth $15,000 for a single individual and $30,000 for a married couple who jointly own the house. There can't be a compulsory selling of a house if the equity interest is less than the exemption limit.
The equity interest, for example, is $10,000 if the house is worth $85,000 but the debtor owes $75,000 on the mortgage. Since this amount is less than the $15,000 exemption cap, the home will be exempt.
The home can be sold to settle the judgment debt if the value of the equity interest exceeds the exemption amount. The creditor will not receive any proceeds from the sale until the mortgage and any other debts secured by the property have been paid off. For the Homestead Exemption, the debtor must be compensated for $15,000 if single and $30,000 if married. If the debtor is married, the creditor must pay $15,000 in cash. Many creditors would not compel the sale of a primary residence because it is too difficult.
To satisfy the judgment lien, the creditor must pay the costs of foreclosing on the property.
The homestead exemption must also be taken into account by the creditor. It makes no sense to compel the selling of a property unless the proceeds are profitable.
A judgment creditor's best strategy is to record the judgment and get a lien on the property, then wait for you to sell it. Since most buyers will not buy a property with a lien, the debtor will have to pay off the lien before sale.
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