A judgment is a court determination of a sum certain due to a party, usually a creditor, entered on the court records in the State of New Jersey by default or after a court determination after a plenary hearing. One important step that is at times overlooked by creditors is that in order to ensure that a judgment becomes a lien on all real estate owned by the judgment defendant in the State of New Jersey, it is necessary to docket the judgment by tendering a $35 fee to the Clerk of the Superior Court in Trenton, New Jersey. In the Special Civil Part where cases are filed for amounts in controversy below $15,000, a judgment must be docketed in the Superior Court to become a recognized lien. A judgment entitles a creditor to pursue assets owned by the judgment defendant by way of obtaining a writ of execution directed to the Sheriff of a county in which the assets are located directing the Sheriff to undertake certain enforcement actions and levy upon assets.
The issue that often arises with judgments is the priority of the claim as opposed to mortgage liens and other creditors who also hold judgments. With respect to other unsecured creditors who obtain judgments, the general rule is the first in time to execute and levy upon assets is rewarded by their diligence and can attach the asset and sell it in partial satisfaction of the claim. Mortgage liens against real estate are higher in priority than judgment liens. An issue that often arises with respect to judgment liens is the priority of that lien as against a bankruptcy trustee. In order to achieve a “perfected’ status against the bankruptcy trustee, the judgment creditor must make a good faith effort to locate, levy and execute upon personal property of the debtor before relying upon the filed lien against real estate.
A common scenario in Chapter 7 cases arises when judgment creditors have not obtained a perfected status and their liens can be “avoided” by a Chapter 7 trustee who holds a superior status under 11 U.S.C. §544 of the Bankruptcy Code as a hypothetical lien creditor with a perfected lien. The priority of judgment liens must be evaluated against secured creditors claims under Article 9 of the Uniform Commercial Code who may have lent money to a debtor and obtained a lien on specific assets.
Searches are often performed in the New Jersey Division of Commercial Recording to determine if any secured creditors are ahead of the judgment creditor by properly filing what is known as a UCC-1 Financing Statement in the proper location, usually the place of incorporation of the business debtor or the location of the property. A judgment remains a lien for 20 years and upon application to the court within six months prior to the 20 year expiration date can be renewed.
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