Jaburg Wilk


Why Bother Recording Your Judgement?

Categories: Bankruptcy, Collections, Real Estate

record your judgment

For years, one of the easiest ways to be paid on your judgment was to record your judgment with the County Recorder. By recording your judgment, it would become a lien against any real property owned in the county by your judgment debtor. Whenever the judgment debtor sold or refinanced their house, you would receive a call from the title company wanting to know how much it would cost for you to release your judgment.

Several years ago the Arizona legislature changed this result to now provide that your judgment is not a lien against homestead property owned by an individual judgment debtor. Homestead property is defined as $150,000.00 in value for a dwelling house in which a person resides. By the legislature mandating that a judgment is not a lien on homestead property, judgment debtors are now free to sell and/or refinance their house without paying off your judgment. A bankruptcy case recently confirmed that a recorded judgment is not a lien against a debtor's homestead property.

Although the legislature said that a judgment is not a lien against homestead property it left in place a procedure for the Sheriff to sell homestead property in satisfaction of the judgment. This process is best understood by an example. If the value of the debtor's house was $1,000,000 and the consensual lien (the mortgage) was $500,000.00, the process allows the Sheriff to sell the debtor's home at public auction, provided the Sheriff first receives a bid that pays $500,000.00 to the mortgage company, $150,000 to the debtor for their homestead exemption, with the surplus proceeds going to pay the judgment creditor. It is only a result of the recent increase in home values that this procedure has even become an option. The Sheriff's appraisal sale process must be completed prior to a debtor's bankruptcy filing if the creditor is to be paid.

Does it still make sense to record your judgment in the county where the judgment debtor lives? Yes, because the debtor may own more than one parcel of real property in the county. If the judgment debtor owns multiple parcels, the debtor must "declare" to which property he claims as homestead exempt.

Founded in 1984, Jaburg Wilk offers extensive experience, diversity in practice areas and the ability to think like a business owner. We are an Arizona mid-sized AV rated law firm, the highest rating that a law firm can receive. Our attorneys, paralegals, and other support staff meet our clients' diverse legal needs and provide exceptional service through our 21 Fundamentals which comprise The JW Way.