How to File a Lien on Property When Owed Money

Collecting on a judgment by placing a lien against the debtor's property can be a slow process, but you'll usually end up collecting more than the amount of the original debt for your patience. Technically, the lien itself doesn't mean the person who owes you money must pay you. But if he wants to sell his property or refinance it, the lien usually bars him from doing so unless he settles his debt to you.

Step 1

File a collection lawsuit against the debtor. Depending on how much he owes you, you can file a complaint for collection in your state's small claims court or civil court. Small claims courts are usually limited to debts of less than $10,000, and in some states it is even less.

Step 2

Serve the debtor with a copy of your complaint after you've filed it with the court. In some states, this means giving the copy to the county sheriff and having him deliver it to the debtor personally. Other states allow you to send it to him by certified mail, return receipt requested, or the court will forward a copy to the debtor for you. When you file your lawsuit, ask the court clerk to explain your state's procedure.

Step 3

Attend the court hearing. The court will send you a notice letting you known when it is scheduled. If the debtor doesn't respond to your lawsuit, the judge will order a default judgment against her. Otherwise, if she answers and appears, you will have to argue your case and prove to the judge that she owes you the money.

Step 4

Take a certified copy of your judgment to the recorder's office if your lawsuit is successful. Go to the recorder's office in the county where your debtor's property is located. A certified copy is the original one the court gives you, usually embossed or marked with an official seal.

Step 5

Ask the recorder's office for any additional forms you might need to file in addition to your judgment. The exact procedure varies from state to state. Illinois requires you to file a memorandum of judgment and California requires an abstract of judgment form. Complete the appropriate forms and file them with the county recorder. The clerk will make and keep a copy of your judgment and officially place your lien against the debtor's property.

Tip

Your lien stays in place and has no effect unless and until the debtor tries to sell or refinance his property. Either the buyer or the mortgage lender will check to see if he has clear title to the property. Because you have recorded your lien, it will show up in this search. You generally receive payment at the time of settlement, either from the proceeds of the sale or because the debtor had to refinance a little more than planned to satisfy your debt. Most states will tack on interest and reimbursement for the costs you incurred getting the judgment and placing the lien.

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