When you find yourself in debt, creditors can use a number of tactics to try to collect the balance that you owe. In this situation, you may hear the terms "judgment" and "lien" used frequently. While these terms are related to one another, they do not mean the same thing.
Getting a Judgment
A judgment is an order from a court to pay money to another individual or company. To obtain a judgment, a creditor must first file a lawsuit against you. He then will present a case against you in court. If you cannot prove that the debt was issued fraudulently, then the court will issue a judgment against you. At that point, the court essentially demands that you repay the debt.
A lien is a claim on property that is held by a creditor. Liens can be placed on property voluntarily or involuntarily. For example, one of the most common types of liens is the mortgage loan. A mortgage lender places a lien on your property when you borrow money to purchase it. If you do not repay the loan, the lender can use this legal claim to foreclose on your house. Liens also can be placed on your property if you refuse to pay a debt.
Liens vs. Judgments
Liens relate to judgments in that they can be obtained as a result of getting a judgment against a debtor. Once the judgment is obtained, a creditor can then use that judgment to obtain a lien on some of your property. For example, the creditor could use the judgment to file a lien on your home. Then when you try to sell the house, you will have to repay the debt before you can keep any of the equity.
Other Uses of Judgment
When a creditor gets a judgment against you, it does not necessarily have to result in a lien being placed on your property. Creditors can use judgments for other purposes to collect the money from you. For example, the creditor could use the judgment to garnish your wages. With this procedure, part of your paycheck is taken out and given to the creditor before you receive it. The creditor could even use the judgment to levy money out of your bank account. In some cases, you can work out a payment arrangement with the creditor to make sure that the debt is paid.
- The Money Alert: What Is a Lien?
- FreeAdvice: What Is a Judgment Debtor?
- FreeAdvice: How Is a Judgment Lien Created?
- Consumer Financial Protection Bureau. "What Is a Judgment?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "What Is a Statue of Limitations On a Debt?" Accessed March 16, 2020.
- Texas Law Help. "What Is an Affirmative Defense?" Accessed March 16, 2020.
- Federal Trade Commission. "Time-Barred Debts." Accessed March 16, 2020.
- The Florida Bar. "The Life of a Money Judgment in Florida Is Limited for Only Some Purposes." Accessed March 16, 2020.
- Virginia Law. "§ 8.01-251 Limitations on Enforcement of Judgments." Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "How Long Does Negative Information Remain on My Credit Report?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "What Is a Garnishment?" Accessed March 16, 2020.
- Consumer Financial Protection Bureau. "Can a Debt Collector Take My Social Security or VA Benefits?" Accessed March 16, 2020.
- County of Napa. "Real Property Levy - Writ of Execution." Accessed March 16, 2020.
- U.S. Marshals Service. "Service of Process: Writ of Execution." Accessed March 16, 2020.
- National Association of REALTORS®. "What Is a Property Lien? An Unpaid Debt That Could Trip Up Your Home Sale." Accessed March 16, 2020.
Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.