A Steady Increase in Judgment Lien

The current economic downturn has caused a steady increase in judgment liens levied against defaulted debtors. This is because the economic downturn has largely been driven and mortgage crisis and general lack of available credit. As banks and other financial institutions felt the pressure to generate cash and increase capital holdings, they began to call in all the risky and outstanding loans they had issued in previous years when credit was widely available and cash holdings were strong. However, since the economy has declined, those with outstanding loans and mortgages cannot afford to repay those debts and have thus fallen behind on loan payments. Desperate for cash, financial institutions have been forced to file lawsuits to recoup their financial losses. This has led to an increase in judgment liens.

A lien, originally derived from the Latin word ‘ligamen’ which means to bond, is a legal claim on somebody else’s property. It is issued by a court of law in order to repay a debt that has defaulted. A lien can only be instituted through a legal case. Therefore, the creditor or the original issuer of the debt must bring a law suit against the debtor. This term is applied to a property in order to guarantee or secure the payment of a debt. In the United States a lien has come represent a very broad range of financial encumbrances. However, in other common-law countries, this term has a very specific security definition and is a passive right to retain the before mentioned property, but not the right to sell that property to reclaim a debt.

A judgment lien is a specific type of financial encumbrance that is unique to the Western world’s financial and legal apparatuses. This term refers to the particular judgment that results from a legal suit and delineates the specific properties or assets that can be held and sold to repay a defaulted loan. Unlike other common-law countries where the debt or loan holder does not acquire the right to actively sell the property or asset, a judgment lien is an active fiscal encumbrance. This means that the debt holder can not only hold the before mentioned property, but can also actively engage in sale negotiations to help recoup potential losses due to bad or risky loans.

This particular financial encumbrance has been steadily increasing commonality due to the sudden economic downturn that has brought many debtors to edge of financial ruin. Bankruptcy proceedings have sky-rocketed. This increase is important when discussing judgment liens because, in many cases, when an individual declares bankruptcy debts and loans can be invalidated or, at the very least, significantly reduced. Loan holders initiate legal proceedings to secure their debtors assets before bankruptcy proceedings remove those assets.

It is a clear sign that the economy has been severely crippled in the last few months when judgment liens increase. These liens are often pursued as a last resort to regain some of the expected loss associated with a bad or risky loan. They are expensive to initiate and legal proceedings can sometimes last days or even weeks, further reducing the amount of money regained by the financial institution.