Judgments and Other Liens and How they affect your plans to workout financial challenges
For many of our short sale clients, they waited a little too long to get our help. Nothing breaks our heart more than to interview a new client at the 11th hour and find that the normal techniques for avoiding foreclosure will not work. Most of these negotiated course changes take a few days or a week to safely prevent foreclosure. Life’s great credit eraser – The “Big F” – can still be stopped, but at the 11th hour, stopping the foreclosure may require the filing or a civil injunction. It often becomes a question of whether it is cheaper to just go ahead and invest in the second worst credit eraser: Bankruptcy. If there is no equity left in the property now, a homeowner must decide at what point he is “throwing good money after bad” by investing in a Short Sale versus Bankruptcy. Getting good legal advice and a second opinion at this time is crucial to the quickest credit recovery and to other positive outcomes. As Solomon said: “In an abundance of counsel, there is wisdom.”
One other major pitfall of waiting too long to commence short sale or to apply some other legal tourniquet to your financial hemorrhage is the accumulation of judgments and other title liens. The second great heart breaker is to interview a client who waited until after credit card companies, health care providers, banks, finance companies, home owner’s associations, management companies, etc., have levied liens on their title. There are steps available for title self-defense that homeowners can use to avoid giving creditors the leverage of involuntary liens. Once the title is “encumbered”, all options become more expensive, i.e., a short sale can only happen by paying a compromise fee to the judgment holder, and even the bankruptcy becomes more expensive if the homeowner wants to keep the property. Additional hearings may be necessary or the “lien factor” may affect the choice of a quick cheap Chapter 7 versus a lingering and expensive Chapter 13. Judgment liens also batter the homeowner’s dignity and surface at the most embarrassing times. Many of our clients want nothing more than to work out their financial problems in their own systematic way and to pay all their obligations. When liens hit the real estate title, chaos is imposed on the homeowner and any hope of an orderly workout begins to disappear.
We are still a big advocate in Virginia for using a short sale to maintain dignity, minimize credit damage, and control your own orderly workout solution for a tough financial challenge. Look for ideas and legal tools in future blogs on how to minimize or delay the devastating impact of aggressive creditors moving to take judgments or levy other liens against the title to your home.