If you are sued for a sum of money that you may owe a creditor and lose the case, the prevailing party will be granted a judgment. That party may then file a judgment lien, which is a lien that attaches to your real estate. When a creditor files a lien against your property, the lien attaches to the property title. If you sell the property, you must pay off the lien before you can receive any of the sale proceeds.
However, creditors can recover the debt you owe before you sell your home and any lien holder can force your home into foreclosure if you do not pay the debt. In foreclosures, lien payment procedures are considerably different than lien payment procedures in private sales. In a foreclosure, a lien’s priority is typically determined by its recording date (though some liens, such as property tax liens, have automatic superiority over essentially all prior liens). First mortgages are usually recorded first and therefore are in the first lien position. The first mortgage is generally then considered the superior or primary lien holder because it was the initial lien on the property.
When a superior lien holder forecloses, it does not have to pay off any “junior” liens. Junior liens are any claims filed after the superior lien holder’s claim. A second mortgage or subsequent judgment liens, for example, are considered junior to the primary mortgage. After the foreclosure, all junior liens are cleared from the home’s title. Although foreclosure clears junior liens, it doesn’t remove liability for those debts. After foreclosure, the former junior lien holders will often pursue other collection methods to recover the debt you owe. In some cases, the creditor may try to attach a new lien to property you own, like your car, and seize that property.
Additionally, any lien holders can initiate foreclosure themselves regardless of lien priority order. However, even though a junior lien holder can initiate a foreclosure, the foreclosure proceeds must still follow a particular distribution plan. “Senior” liens are paid before “junior” liens (those with lower priority), so the junior lien holder must use any money received from the foreclosure sale proceeds to pay off creditors who hold liens superior to its own before it can apply the money to the debt owed by the homeowner. Further, the junior lien holder who initiated the foreclosure must distribute any additional funds amongst the junior lien holders according to each lien’s priority order.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
