Debt Settlement and Property Lien FAQs - Part 2

The purpose of this series is to answer frequently asked questions about liens and how it affects debt settlement and negotiation. Franklin Debt Relief is not a law firm and the following is not to be considered legal advice. This page is kept current only as our time allows, and the information given here may not be current. We make no guarantees as to the accuracy of the information herein and you should not rely on it. For information about your situation, please consult with an attorney licensed in your state.

Can judicial liens be settled?

Yes. Since judicial liens can many times be avoided through bankruptcy, creditors still have the incentive to settle the debt. Also, if the property is never sold or refinanced, the creditor will get nothing, leaving them with more incentive to engage in debt negotiations.

What is the typical settlement percentage of a judicial lien?

Depending on your individual situation, judicial liens are typically settled for between 60 and 80 percent of the balance.

What factors influence the settlement percentage of a judicial lien?

The biggest factor is the state you live in. If you live in a state with complete homestead protection and the lien is on your home, the debt can be settled for as little as 40 percent of the balance. Other important factors include your personal financial situation---how much equity you have in your assets, your income, your total outstanding debts---and who you owe the money to. Every creditor has their own independent policies toward debt settlement.

There are two credit card companies with liens on my home. How do they determine who gets paid first?

The creditor who put a lien on the property first gets paid first.

One credit card company already put a lien on my home. Can I still enroll in your debt settlement program for my other unsecured debts?

Yes.

How will having a lien on my property affect the debt negotiations for my other creditors?

For the most part, it will have little bearing on the settlement of your other debts because in most but not all cases the debt is settled before legal action ever occurs. That being said, if other credit card companies plan on putting liens on your property even though one already has done so, in theory we should be able to settle those for less (assuming you don’t have other assets they can attach, like another property or your wages). The reason for this is simple: having the second or third judicial lien on a property is worth less than having the first lien since they are paid in the order in which the lien was recorded. Like everything, however, this may vary based on your individual circumstance.

How are liens attached to your property?

First a creditor must summons you to appear in court and win a judgment. In about half of all states, once a creditor wins a judgment, a lien is automatically placed on your property in the county in which the judgment was won. In the other states, the creditor must record the judgment with the respective Secretary of State, Circuit Court Clerk, Recorder of Deeds, etc.

Does interest accrue on non-consensual liens?

Yes, interest typically accrues on the lien. The interest rate is not according to the credit card contract in most but not all states.

What is the interest rate based on then?

It is based on the post-judgment interest rate of the state in which the judgment was filed. Typically this varies between 3 and 12 percent of the balance.

How long do liens stay on your property?

This depends on what state you live in, but in general, they last for between 5 and 20 years. In most states, however, they can also be renewed or extended.