In Illinois, an unpaid judgment can become a lien on real estate. A judgment lien allows a creditor to force a sale of property owned by the debtor (you). The money from the sale of the property is then used to pay off the judgment. A creditor can also ask the court to have the property sold by the sheriff, even without a judgment lien. To get a judgment lien, the creditor must file certain documents in the county recorder's office.
The Homestead Exemption makes it more difficult for a creditor if the property is your primary home, even if they have a judgment lien. Even if the real estate is sold, you may be able to pay money to get your home back.
The effect of the lien
A lien attaches to real estate that you own. In Illinois, a court judgment must first be recorded with the Recorder of Deeds in the county where the property is located. The creditor must record the judgment even if the property is located in the same county where the judgment was entered. Then, a creditor with a judgment lien may be able to force you to sell your property to pay off the judgment. They can do this even if you owe other creditors money.
The lien remains in effect for 7 years, even if the creditor does not force a sale. This means that you probably cannot sell the real estate during this time because a buyer would want you to pay the judgment in full before agreeing to purchase the property. The creditor can also renew the lien twice, for a total of 21 years. Once the judgment lien is recorded with the county's Recorder of Deeds, the creditor can sue to enforce the lien. Enforcing or foreclosing on the judgment lien is done the same way as a mortgage foreclosure.
Foreclosing on the lien
If the creditor decides to enforce the judgment lien, he will do a title search on the property to find any other liens on the property. The parties with those liens will also be named as defendants in the foreclosure complaint so they can resolve their claims.
- Information regarding the judgment lien
- A request for a judgment of foreclosure
- A request for a judicial sale of the property plus costs.
- A copy of the original judgment which was used to obtain the lien on the property
- A statement regarding the six month post-sale redemption period.
Defendants have just 30 days from the date they are served to respond. If you do not respond, the court may enter a default judgment against them.
The creditor will record a notice of foreclosure with the county’s Recorder of Deeds. This notifies the public of the lawsuit affecting the title to the property. It also prevents any unknown creditors from claiming proceeds from the foreclosure sale. A notice of the foreclosure action will also be published in the local newspaper once a week, for three consecutive weeks, at least 30 days before a judgment of foreclosure is entered by the court.
If the court issues a judgment of foreclosure, the lien is over because of the property sale. The original owner still has one last chance to get the property back, as discussed below.
Notice and sale
A creditor must try to give you notice of any proposed sale of real estate. Just like the notice of foreclosure, the notice of sale must be published in a local newspaper. They must publish the first notice 45 days before the property sale, and the last notice at least 7 days before the sale. The published notice will be in the real estate section of the newspaper in the section containing legal notices. A notice should also be posted in 3 public places within the county, usually in the sheriff's office and in the courthouse. The notice must have the date, place, and time of the sale. It must also name the creditor and debtor.
The foreclosure sale will be a public auction. After the auction, the court will issue an order approving the sale and payment of all costs and expenses. The sheriff will then deliver a Certificate of Sale to the purchaser. The proceeds from the sale will be paid to the creditors in order of priority. If there is any money left over after paying the creditors, it is returned to you. The court’s order approving the sale will state the final date of the redemption period. The redemption period is your last chance to get the property back.
Even where the creditor has forced a sale of the real estate, you have the right to buy back the property. You can do this within 6 months from the date of sale. To buy back the property, you need to pay the amount the buyer paid for the property plus 10% interest. These funds are paid to the creditor or buyer. You will receive a certificate of redemption which you should record with the county’s Recorder of Deeds. The certificate of redemption cancels the sale and make your recovery of the property official.
Motion for turnover
As mentioned above, a creditor can ask the court to have the sheriff sell your property without a judgment lien. A judgment creditor can file a Motion for Turnover of Real Property to satisfy the judgment. This means that if the motion is granted by the court, your property is turned over for sale by the sheriff without the expense or delay of a foreclosure or lien.
Motions for Turnover are not used often, and have these requirements:
- The judgment debt must be greater than your equity interest. Equity interest refers to the value of the home minus what you owe on the home. For example, if your home is worth $100,000 and you have a mortgage for $70,000, your equity interest is $30,000.
- The creditor must repay any mortgages on the property before keeping any proceeds from the sale.
- If the property being turned over is your primary residence, it is subject to the Homestead Exemption discussed below.
The Homestead Exemption
In Illinois, the Homestead Exemption stops your primary home from being sold to satisfy the lien if your equity interest in the home is less than the exemption amount.
The value amount of the exemption is $15,000 for a single person, and $30,000 for a married couple who own the home together. If the equity interest is less than the exemption amount, there cannot be a forced sale of the house.
For example, if your home is worth $85,000, but you owe $75,000 on the mortgage, your equity interest is $10,000. This is less than the $15,000 exemption limit, so your home is exempt from a forced sale.
If the amount of the equity interest is greater than the exemption amount, then the home may be sold to satisfy the judgment debt. The creditor would not get any money from the sale until after the mortgage and any other loans on the property are paid off. You must receive payment for the Homestead Exemption. The creditor must pay you $15,000 in cash or $30,000 if you are married. Many creditors do not force a sale of your primary home because it takes too much effort.
See Money and property a debtor can protect from collection for more information about exemptions.
The creditor has to pay the costs of foreclosing on the property to satisfy the judgment lien. These costs include:
- The certified copy of the judgment
- Lien searches
- A title report
- Recording charges
- Publication expenses
- The sale cost
The creditor also has to account for the homestead exemption. It does not make sense to force the sale of a property unless money will be made from the sale, so it’s most likely to happen when you can pay the judgment or if the amount of the judgment is large and you have a lot of equity in the property.
Typically the best strategy for a judgment creditor is to record the judgment and get a lien on the property, then wait for you to sell it. Most buyers will not purchase a property that has a lien on it, so you will have to pay the debt before you can sell the property.