COLLECTING YOUR JUDGMENT: PART THREE
As discussed in parts one and two of this series, when a creditor is faced with a balance owed on a judgment, in Indiana, the creditor may decide to take further action in court resulting in a court order to a third party to pay to the creditor money that the third party owes the debtor. Part three of this series looks at an alternative action that a creditor may take not necessarily involving court action in order to collect on a judgment.
In Indiana, once a creditor obtains a judgment, the judgment automatically becomes a lien upon any real estate property owned by the debtor in the county in which the judgment was obtained. For example, if the debtor owns real estate in Vanderburgh County, Indiana, a Vanderburgh County judgment will automatically become a lien upon that property once the judgment is obtained. If, however, the debtor owns property in another Indiana county, then the judgment will need to be docketed in that county in order to become a lien upon the real property. In some other states, including Kentucky, a creditor is required to record a lis pendens notice before a judgment becomes a lien upon real property.
Once the judgment becomes a lien, creditors can initiate a foreclosure action on the lien, ultimately seeking to have the property sold at sheriff’s sale or master commissioner’s sale. In the alternative, a creditor can simply wait until the debtor sells the property on his own. The creditor’s lien will appear in the real estate records and should be discovered by the potential buyer in connection the transaction. A buyer wishing to purchase the real estate without liens or encumbrances will insist that the lien be satisfied before the sale is closed. Typically, the buyer or closing agent will reach out to the creditor prior to the real estate closing and ask for a current balance on the judgment lien. The balance is then paid to the creditor from the proceeds of the sale of the real estate and the creditor will be asked to release the lien accordingly.
As this series has demonstrated, obtaining the judgment against the debtor is only part of the process. Satisfying the judgment through garnishment, attachment or the judgment lien process may be necessary for a creditor to be made whole.