Understanding Judgment Liens

A judgment lien can be a useful tool for a creditor who has prevailed in a lawsuit and needs to secure the payment of a debt. This court-ordered mechanism allows a creditor to place a legal claim on the debtor’s real property. If the debtor proceeds to sell or refinance the property, the creditor is paid back from the proceeds. Ultimately, a judgment lien creates a priority claim over subsequent creditors or liens that may be filed against the property.

What Is a Judgment Lien?

Michigan statute MCL 600.2801 allows a creditor who has obtained a judgment against a defendant to secure payment by recording evidence of the judgment. This security is in the form of a judgment lien against defendant’s real estate located anywhere in a county. These liens are effective for five years after recording and they can be renewed for an additional five years. However, the lien must be rerecorded not less than 120 days prior to expiration.

Failure to renew a lien can result in a creditor foregoing their secured status. This means they would become an unsecured creditor, leaving them with fewer rights in collection proceedings or bankruptcy.

How Do Judgment Liens Work?

Judgment liens ensure that the creditor will be paid from the proceeds of a sale, refinance or transfer of title to the defendant’s real estate. They attach to real estate owned at the time the lien is recorded or acquired by the defendant in the future while the lien is effective. They are junior to any previously recorded encumbrance against the real estate.

The creditor cannot force a sale of the real estate and must wait for the defendant to transfer title or mortgage the real estate in order for the judgment lien to be paid off. Despite the limitations, judgment liens are a cost effective means of increasing a creditor’s chances of recovering a judgment when other methods such as garnishments or seizure of other property will not work.

Property Exemptions

Under Michigan law, certain property is exempt from the reach of creditors. By statute, the following property is protected from judgment liens:

• Up to $46,125 in home equity for a primary residence
• Up to $69,200 in home equity for residents over 65 or disabled
• Furniture, clothing, pictures, certain household items, and tools used for a trade
• A certain amount of equity in a car
• Tax-exempt retirement accounts
• 60% of wages with weekly protections for dependents

Property owned as tenants by the entirety is also protected from the creditors of only one spouse.

Contact an Experienced Michigan Real Estate Attorney

If you are a creditor seeking to file a judgment lien, it’s essential to work with an experienced attorney who can assist you with navigating the legal process. With office locations in East Lansing, Mt. Pleasant, Grand Rapids, and Detroit, The Gallagher Law Firm provides high-quality representation to creditors to help ensure their financial interests are protected. To learn more about how we can assist you, contact us online, call (517) 853-1515 or email bpg@thegallagherlawfirm.com.