Real Estate: Docketing Judgments to Secure an Interest in Real Estate

     In previous blogs we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will review the benefits of docketing judgments to aid in the collection of your debt. 

     Docketed judgments create a lien against the debtor’s real estate in the county or city in which the lien is docketed. Accordingly, make sure that you know where your debtor owns, or may own (e.g., through future purchase or inheritance), real estate. Once recorded, the lien will take priority in line with the date of recording (with some limited exceptions). Depending upon your debtor’s problems, you may have equity to cover your lien. Obviously you will want to “get in line” sooner rather than later to give you the best chance of collection. 

     Once a lien is in place, it must be addressed at any sale or refinance of the real estate. The lien must also be addressed in bankruptcy -- if the debtor does not file a motion to strip the lien, the lien will survive a bankruptcy discharge. 

     If all other collection measures are unsuccessful, you can consider bringing a creditor’s bill, which is an action to force the sale of real estate to satisfy a judgment under Virginia Code §8.01-462: 

     

     Jurisdiction to enforce the lien of a judgment shall be in equity. If it appears to the court that the rents and profits of all real estate subject to the lien will not satisfy the judgment in five years, the court may decree such real estate, any part thereof, to be sold, and the proceeds applied to the discharge of the judgment. 

     

     Although creditor’s bills may be costly, given the right judgment it is an effective collection tool. Determining what judgments are "right" requires experience and good judgment. 

     We have experienced attorneys and staff who can seek judgment and then docket and enforce the same.

Collections: Creditor's Bill

     The action to force the sale of real estate to satisfy a judgment is called a "Creditor's Bill." This action is governed by Virginia Code §8.01-462: 

     Jurisdiction to enforce the lien of a judgment shall be in equity. If it appears to the court that the rents and profits of all real estate subject to the lien will not satisfy the judgment in five years, the court may decree such real estate, any part thereof, to be sold, and the proceeds applied to the discharge of the judgment. 

     Although the action may be costly, given the right judgment it is an effective collection tool. Determining what judgments are "right" requires experience and good judgment. 

Collections: The Importance of Docketing Judgments

     If the creditor has obtained a judgment in the General District Court, the creditor should ensure that an abstract is recorded in the Circuit Court where the debtor's real property is located. Docketing perfects a lien against the debtor's real estate in that jurisdiction. Docketing also provides creditors with the right to force the sale of the real property to satisfy the debt. Judgments obtained in the Circuit Court, however, are automatically docketed, but only in that locality, pursuant to Virginia Code §8.01-446. If the debtor owns realty in another jurisdiction, the creditor should have the abstract of the judgment docketed in the Circuit Court of that jurisdiction in order to perfect a lien. 

Collection: Creditors Bill

     The action to force the sale of real estate to satisfy a judgment is called a "Creditor's Bill." This action is governed by Virginia Code §8.01-462:
                     Jurisdiction to enforce the lien of a judgment

                     shall be in equity. If it appears to the court

                     that the rents and profits of all real estate subject
                     to the lien will not satisfy the judgment in five years,

                     the court may decree such real estate, any part thereof,

                     to be sold, and the proceeds applied to the discharge

                     of the judgment.
     Although the action may be costly, given the right judgment it is an effective collection tool. Determining what judgments are "right" requires experience and good judgment.

Collection: The Importance of Docketing Judgments

    If the creditor has obtained a judgment in the General District Court, the creditor should ensure that an abstract is recorded in the Circuit Court where the debtor's real property is located. Docketing perfects a lien against the debtor's real estate in that jurisdiction. Docketing also provides creditors with the right to force the sale of the real property to satisfy the debt. Judgments obtained in the Circuit Court, however, are automatically docketed, but only in that locality, pursuant to Virginia Code §8.01-446. If the debtor owns realty in another jurisdiction, the creditor should have the abstract of the judgment docketed in the Circuit Court of that jurisdiction in order to perfect a lien.