You’ve gotten a judgment against that troublesome borrower who hides assets and plays games, but you are afraid that it will be many moons before you are able to collect. You know that one of the best ways to get this kind of person to deal with you is to get a statewide judgment lien against him. This is because that judgment lien will show up on his credit reports and effectively block him from getting a car loan or a credit card. Faced with the prospect of paying cash for a clunker, this borrower would rather pay you off than pay cash for a new ride. Fortunately, most borrowers are not like this, but there are a few, and you know the type!
Starting on January 1, 2010, California will finally bring its personal property judgment lien into parity with its real property judgment lien. Up until then, a California real property judgment lien had a life of 10 years and could not be renewed. But a judgment creditor could only get a lien on personal property for 5 years, and renewal was not available.
Somehow, the California Legislature passed, and the Governator signed a bill to amend Section 697.510 of the California Code of Civil Procedure that permits a judgment creditor to renew a notice of judgment lien filed with the California Secretary of State. In California, personal property judgment liens are created by filing a notice of judgment lien with the California Secretary of State in a manner similar to filing a UCC-1 financing statement. Judgment liens are indexed in the same manner as security interests and have the same priority.
The practical effect of the new law is to allow a judgment creditor to file a continuation statement to extend a judgment lien. The process will be similar to what is now done to continue a financing statement for more than five years. In order to extend the validity of a personal property judgment lien, the creditor will have to file a continuation statement in the final six months of the life of the judgment lien. There are no limits to how many times a personal property judgment lien can be extended.
As experienced workout professionals know, all too often, getting a judgment is not the end of collecting a troubled loan. It is critical to promptly record judgment liens in counties where the borrower owns or is likely to own real property and to calendar the expiration of those liens so they can be renewed. Similarly, it is important to promptly file a notice of judgment lien with the California Secretary of State to create a statewide lien on personal property owned by the borrower. With the new law, creditors will also have to calendar the expiration date of personal property judgment liens and remember to file continuation statements every five years.
It is a good idea to review all of your existing personal property judgment liens now. If those liens expire after January 1, 2010, calendar the date and don’t forget to file a continuation statement in the last six months before the lien expires.
The JMBM Special Assets Team™ has collected many judgments over the years. We know what it takes to uncover hidden assets and to protect the investment that our creditor clients have made in getting the judgment in the first place.
This is Dick Rogan, bank lawyer and author of www.SpecialAssetsLawyer.com, signing off for now. Join us again soon to check out what’s new in the World of Workouts.
Year after year, day after day, workout professionals in the know rely on JMBM’s Special Assets Team™ to handle problem commercial and real estate loans. Whatever problem loans you have, chances are, we’ve seen it. Give us a call.
Our Perspective. JMBM represents commercial banks, special servicers, private lenders, asset-based lenders, hard money lenders and factors. We help lender clients throughout the United States craft business and legal solutions to their commercial and real estate troubled loans. For more information, please contact Dick Rogan at RRogan@JMBM.com, or (415) 398-8080.
Richard A. Rogan is Chair of the JMBM Special Assets Team™. He also serves as the co-managing partner of JMBM’s San Francisco office and co-chair of its Bankruptcy Practice Group.
JMBM’s Special Assets Team™ has represented hundreds of lenders in California and throughout the United States. We regularly appear in bankruptcy courts, district courts and superior courts. We are proud to serve as trusted counsel and advisors who look for a business solution and try to help lenders find the best possible resolution for each troubled loan. Whether a loan is being newly documented, restructured or litigated, JMBM’s Special Assets Team™ has the skill, know-how and experience to solve your problem in a practical no-nonsense way.
NOTE TO CONSUMERS: As a matter of Firm policy, JMBM does not represent individual consumers who have disputes with their lenders. Many lenders have specialized consumer workout professionals who have the time to help consumer borrowers. There are many fine attorneys who specialize in representing consumers. Individuals with consumer lending problems should contact a lawyer or law firm who specializes in consumer insolvency and bankruptcy in their local area. When in doubt, we suggest you contact your local bar association’s Lawyer Referral Service. [For example, see Bar Association of SF or LA County Bar Association Lawyer Referral Services]
JMBM does not provide legal advice to consumers, and cannot respond to consumer inquiries.