Once you get a judgment, how do you get paid by the judgment debtor – the person owing you money under the judgment? One way to collect on a judgment is to place a lien on property owned by the judgment debtor.
In Arizona, the person in whose favor a judgment has been entered can record a copy of the judgment to create a lien against property owned by the judgment debtor. As with any other property interest, the judgment must be recorded in the County Recorder’s Office in the county where the judgment debtor’s property is located. If the judgment debtor holds property in several counties, this requirement means you will need to record the judgment in each of the counties separately.
To get paid, a lien holder can apply to the Court to force the judgment debtor to sell non-exempt property subject to a judgment lien. Or the lien holder can wait to see if the lien is satisfied when the property transfers. In either situation, what the lien holder can apply to satisfy his or her judgment is the net sales proceeds from each foreclosure – the money left over after paying off all liens against the property that have higher priority than the one being foreclosed, with priority established by the date and time each lien is effective against the property. Liens like acquisition loans typically will have first-position priority because they are generally recorded at the time a property is purchased. These and other liens will be satisfied in the order of their relative priority.
In some cases, property can be exempt from foreclosure, and even what it means to be exempt can vary in some situations. For example, Arizona law used to provide that a judgment debtor’s primary residence could not be sold to satisfy a judgment lien. After several changes to that law, a Federal Court interpreted this homestead exemption to mean that the judgment debtor gets to keep the first $150,000 of net sales proceeds (the amount of the exemption in Arizona) to purchase another residence. No state court has published a decision interpreting the changes in state law, however, a recorded judgment creates a lien against non-exempt property owned by the judgment debtor for five years; the judgment and lien can also be renewed to extend the effectiveness of the lien longer. Assess your options when the judgment is recorded and periodically throughout the five years.
If you have questions about collecting on a judgment, please consult with an attorney to fully understand the liens that could be created and how to foreclose on them.
