A sheriff's levy and sale are actions taken by a sheriff's department or other appointed officials to execute a judicial judgment against a debtor's property to satisfy a judgment amount with a creditor. Though a sheriff's levy and sale can result from any substantial unsatisfied debt, the most common example is the case of a mortgage foreclosure.
A sheriff's levy is the action taken to execute a judgment against a debtor. The court issues a writ as a result of a judgment. In the writ, the court authorizes the sheriff to take possession of the property and advertise it for sale to satisfy the judgment. Non-mortgage judgments are usually decided in small claims court. The sheriff's levy is the first step taken to enact a judgment in order that a sheriff's sale may be advertised and take place.
A sheriff's sale is the action taken to auction the seized debtor property to the highest bidder. After costs incurred by officials appointed to seize and auction the property are recovered, the net proceeds from the auction are paid to the creditor named in the judgment. The auctioned properties rarely sell for the full market value. If after sale the proceeds do not recover the judgment and costs incurred by the appointed officials, the creditor may pursue other assets to settle the remaining judgment amount.
Other Settlement Options
If the property seized in a sheriff's levy and sale does not meet the judgment amount, a creditor may have other options to settle the judgment. In addition to pursuing other debtor assets, in some cases the creditor may bid on the property auctioned at the sheriff's sale by using part of the judgment amount to bid. In an example provided by Santa Clara Law, if a creditor receives a judgment of $50,000, then in turn submits a winning bid on a debtor asset of $25,000 that covers the incurred costs, the creditor becomes the owner of the property. The creditor then could sell the property and retain the proceeds. Because the creditor became the property owner at auction, these proceeds are not part of the judgment amount.
Some states limit a creditor's ability to pursue debtor assets. One example is when property is the debtor's primary residence. In a state where the debtor receives a homestead exemption, the creditor would not be able to pursue the property if the homestead exemption exceeds the debtor's equity in the residence. For example, if the judgment amount is $25,000 and the debtor's equity in the residence is $50,000, barring any state exemptions the creditor could pursue the residence to settle a judgment. But in a state where the homestead exemption is $35,000, the creditor would not be able to pursue the residence because the homestead exemption is more than the debtor's equity in the home.
Other Asset Exemptions
Other debtor property exempted by some states includes clothing, home appliances, cars, jewelry and medical items. Federal law protects Social Security benefits, retired rail worker and military benefits, and some property owned by members of the military. It is best to hire an attorney when determining what assets are included in and what's exempt from seizure during sheriff's sale proceedings.
Tim Burris has over seven years experience writing and editing formal sales proposals and marketing materials. Tim has also worked as a freelance journalist for two news organizations. His cover story in "NUVO Newsweekly," Financial Disclosure, May 5, 2004, won an award from the Indiana Society of Professional Journalists. Tim has a Bachelor of Science degree in business, finance from Indiana University.