Understanding an Abstract of Judgment
You might hear the term “abstract of judgment” and wonder what it means, especially when it comes to taxes. Let’s break it down. It’s a legal document, essentially a public notice, that makes a court judgment against you a lien on your real estate. Think of it as a formal “IOU” that’s attached to your property.
How an Abstract of Judgment Works
Imagine you owe money, whether it’s from unpaid taxes or a civil lawsuit. The person or entity you owe (the creditor) might go to court and get a judgment against you. This judgment is an official declaration that you owe that debt. Now, a simple judgment doesn’t automatically affect your property. That’s where the abstract of judgment comes in.
When the creditor records an abstract of judgment in the county records, they create a lien against any real estate you own in that county. A lien is a legal claim against an asset, giving the creditor a security interest in it. This means they have a claim to it until you pay off the debt.
Here’s how it works, step-by-step:
- Court Judgment: A court rules that you owe a certain amount of money to someone.
- Abstract Creation: Your creditor asks the court clerk for a certified copy of the judgment which is usually called an abstract of judgment. This document will summarize the core information of the judgement.
- Recording: The creditor files the abstract of judgment with the county recorder’s office.
- Lien Creation: Once recorded, the abstract of judgment creates a lien against any real property you own in that county. This means, if you try to sell or refinance the property, you’ll have to clear up the debt first.
Why is an Abstract of Judgment Used?
Abstracts of judgment are used by creditors (including tax agencies) to ensure they have a good chance of collecting the debt owed. It essentially secures the debt against your property. Without an abstract of judgment, a creditor might face a bigger risk of never receiving the funds owed if you sold or transferred property to another. It ensures that the debt will likely be resolved as part of a future sale or refinancing.
Let’s say you sell your house with a lien in place. The title company will make sure the debt is paid off from the sale proceeds before you get any money.
Who is Affected by an Abstract of Judgment?
Abstracts of judgment affect individuals or businesses who:
- Have a court judgment against them.
- Own real property (land, houses, buildings, etc.).
- Fail to satisfy (pay off) the judgement as required.
This includes homeowners, landlords, business owners, and anyone else who might have a debt that goes to court. Taxpayers are also affected since tax authorities may use abstracts of judgment to recover tax debts. If you owe taxes, the IRS or state tax agencies can get a judgment against you and file an abstract of judgment to secure their claim.
How Long Does an Abstract of Judgment Last?
The duration of an abstract of judgment can vary depending on state law, but they are usually valid for a set number of years (often 10 years or more), depending on the state. However, creditors can often renew the lien before it expires by recording another certified copy of the judgment.
- State-Specific Rules: The expiration and renewal rules are often set at a state level, meaning that you should check your local laws.
- Renewals: Many states allow creditors to renew the judgment lien, keeping it in place for longer.
How to Find Out if There is an Abstract of Judgment Against You
If you’re unsure if an abstract of judgment exists, you can do the following:
- Check Your County Records: Contact the county recorder’s office in each county where you own property. These offices usually have online databases where you can search for recorded documents.
- Title Search: If you’re buying or selling property, a title company will perform a title search, which will reveal any existing liens, including any abstracts of judgment.
What to Do if There is an Abstract of Judgment Against You
If you find out there’s an abstract of judgment, you have a few options:
- Pay the Debt: The most direct solution is to pay the full amount owed. Once you’ve paid, the creditor is required to record a satisfaction of judgment, which removes the lien from your property records.
- Negotiate a Payment Plan: Sometimes, it’s possible to negotiate a payment plan with the creditor. This allows you to repay the debt in installments. Make sure any agreement includes removing the lien upon full payment.
- File for Bankruptcy: In some situations, bankruptcy can help discharge or manage debt, including debts subject to a judgement, potentially removing or reorganizing the lien.
- Challenge the Judgment: If you believe the judgment was obtained unlawfully, you might have grounds to challenge it in court. Seek legal advice.
Common Mistakes and Misconceptions
- “It’s just a judgment, it doesn’t matter”: This is a dangerous misconception. The abstract makes it harder to sell or refinance.
- “Only large debts result in abstract of judgment”: No, it can be for all sizes of debts, tax or otherwise.
- “The lien will disappear after a few years”: This is not always true. Creditors often renew the judgment lien, so you can’t always wait it out.
Related Terms
- Judgment: A formal decision by a court on a matter.
- Lien: A legal claim against an asset, securing a debt.
- Creditor: The person or entity that is owed money.
- Debtor: The person or entity that owes money.
- Satisfaction of Judgment: A document confirming that a debt has been paid and the lien has been released.
Key Takeaways
- An abstract of judgment makes a court judgment a lien on your real property.
- It can create hurdles when selling or refinancing your property.
- You can find out if there’s an abstract of judgment by searching county records or ordering a title search.
- The best approach is to address the debt to clear the lien.
Dealing with an abstract of judgment can be stressful, but understanding what it is and how it works can help you handle it effectively. Don’t hesitate to get professional financial or legal advice if needed.