I am not a lawyer, I am a Judgment and Collections Broker. This article is my opinion, based on my experience in California, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
In the old days, one of the easiest ways to satisfy a judgment was to record a lien on a judgment debtor’s real estate.
When property was increasing in price, refinances and resales happened often enough that one could count on getting paid eventually (usually in full), by recording a lien on the judgment debtor’s real estate property.
These days, many properties are underwater, and recording liens on upside down property often ends up being a waste of time and money. Even these days, some properties still sell, and get refinanced.
If your lien is recorded properly, you might get a call or a letter someday. Often the judgment debtor or someone working with them on a loan or a sale, might contact you.
Sometimes they will offer to pay in full, other times they will ask or tell you, to settle for pennies on the dollar, to release your lien.
A promise is only a concept, and you should require cash. Usually, you will be asked to sign a “release of lien” form, based on a promise to pay you. The payment should come from an escrow fund. If the money is not coming from an escrow account, be very careful. Many creditor satisfy judgments on promises, and get burned when the judgment debtor never pays them.
How can you make sure you will get paid, and how should you handle this situation? Make sure to get paid, before you release a lien, and especially before you satisfy a judgment.
These days, it is a good idea to compromise when appropriate. If they want to pay half, offer 10% off, then negotiate, based on the situation of the judgment debtor. “Know when to hold em, know when to fold em”. Try to make the deal work, however try not to get fooled.
If you are told you must take ten cents on the dollar, or else get nothing, ask them which of their other creditors are willing to settle for that little?
If you are the only creditor being asked/warned that you should steeply discount, that might be a warning sign. One idea is to have a goal of only giving breaks to judgment debtors in difficult situations.
Before releasing a lien, you should be a party to the escrow, just like a lender would insist on. You could bring your judgment lien release to the escrow closing, and give it to them, right after they hand you a certified check.
It is usually a good idea to insist on dealing with the escrow company directly. Ask the escrow or title company to send you a demand release request (sometimes called a payoff statement).
Usually, the title or escrow company will send you a lien release request, or a payment statement request. Fill it out, or make your own answer sheet for them. Make sure to write, that you will release the lien and satisfy the judgment, after receipt of full payment.
Along with a response to their demand release request, also send the escrow or title company your payoff statement.
The payoff statement should include the balance due as of the statement date, and include a daily interest amount, so they can calculate the future balance. If you are the assignee of record, mention that too.
Make sure to satisfy the judgment, after you are paid most of what is owed. In the game of judgment recovery, recovering 90% of what is owed is a major win. Settling for 50% is a better return than most judgment owners get!
Title companies do not care that much if you satisfy the judgment or release the lien, because they can prove they paid you. However, the laws and ex-judgment debtors do care, so make sure the lien release, and the satisfaction of judgment is done correctly.
To prevent problems, some judgment owners will include an extra fee, in exchange for working and paying, to take care of all the required paperwork and filings. When answering a demand release request or a payoff statement, they include their charge, to get a certified copy of the satisfaction of judgment, and record it at the county recorder, and send the title company a copy of the recorded documents.
Here is an example of a lien release I have used:
Your Name (your capacity – perhaps the original creditor ar an assignee of record or judgment creditor)
Your City, State, Zip
Your Phone Number and Email
SUPERIOR COURT OF THE (YOUR STATE) OF YOUR STATE
COUNTY OF (YOUR COUNTY), YOUR DIVISION (small claims, civil, etc.)
Case # 123456789
RELEASE OF JUDGMENT LIEN CCP 697.370
The undersigned hereby releases from the judgment lien described herein, all of the interests in the real property in YOURCOUNTY County, presently owned or hereafter acquired of the herein named judgment debtor subject to the lien.
The lien released, is in the name of Dan Defendant, from the judgment lien recorded February 12, 2015, as instrument number 99-99-999999 as recorded in the office of the County Recorder of YOURCOUNTY County, YOURSTATE, described as:
Lot 17, Tract Number 999, in the City of Debtorville, and County of YOURCOUNTY in the state of YOURSTATE, as per the map recorded in book 99, page 99 in the office of the County Recorder of YOURCOUNTY, commonly described as 99999 Debtor Street, Debtorville, CA 99999, having an assessor parcel number of: 99-CA-9876544.
Executed at: __________________________ this 11th day of April, 2016
By: _________________________________ YOUR NAME (Capacity).