How A Judgment Lien Can Help You Collect

In accounts receivable collections, a judgment lien is a valuable tool that can pay huge dividends.  This article will discuss what a judgment lien is, how to obtain it, and how to use it to your advantage.

Recording Your Judgment Lien 

A judgment lien is a security interest in property which is created by an unpaid judgment.  It attaches to all of the defendant’s real estate in New Jersey, and your defendant normally can’t sell, refinance or get a mortgage without paying you off.

Obtaining the lien is easy.  Once you have a judgment, all you have to do is record (or “docket”) it in the Superior Court’s central office in Trenton.  This gives you 2 advantages for collecting your judgment: first, you can wait passively until the defendant buys, sells or refinances. And second, if you can’t find other (non-real estate) assets to satisfy the judgment, you can have the Sheriff levy on the real estate and sell it.  

Levying On Real Estate  

When multiple liens exist, priority means the order in which they’re paid from the proceeds of a sale. Perfecting a lien means performing a specific act that secures your priority over a subsequent or unperfected lien.  

The way to perfect a judgment lien is to levy on the real estate.  But first you have to look for other (non-real estate) assets to satisfy the judgment.  If other assets are insufficient, you can get an Order authorizing the sale of real estate.  Once you have the Order, having the Sheriff levy on the real estate will perfect your judgment lien. 

Levying on the real estate has 3 important benefits: first, it establishes priority over later or unperfected liens.  Second, if the defendant files for bankruptcy, the Bankruptcy Trustee can cancel an unperfected lien and treat you as unsecured; by levying on the real estate, you perfect your lien, the Trustee can’t cancel it, and you’re treated as a secured creditor. And third, it allows you to sell the property to collect your judgment. 

Whether perfected or unperfected, a judgment lien can be invaluable in accounts receivable collections. You can docket your judgment and wait passively to get paid, or after searching for other assets, you can levy on real estate and sell it to satisfy your judgment.

For more information on accounts receivable collections, or if you’d like to discuss a specific collection issue, call me at 856-667-1669 or contact me here.

This material is for informational purposes only and should not be construed as legal advice.  No person should rely on this information without seeking the advice of an attorney.