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Legal Staff News & Views Newsletter Enforcing Judgments Against Real Estate A judgment against real estate can be a difficult and tedious job. Judgment creditors must investigate the debtor's financial affairs and the real estate available for levy. Sorry, there are no short cuts to this process. Judgment creditors enforce judgments against real estate by way of a real estate levy. A levy allows the judgment creditor to direct a court officer, usually the county sheriff, to seize real estate assets of the defendant/judgment debtor and sell them to the highest bidder to satisfy the judgment out of the proceeds of the sale. A creditor cannot have a judgment lien to levy upon until you have an enforceable judgment, which you get by either disposing of the entire litigation or comply with Supreme Court Rules 304(a). You can begin enforcement immediately after judgment is entered. The statutory requirements for a levy to enforce an Illinois judgment are set forth at 735 ILCS 5/12-101. A lien of judgment will last for several years. To be enforceable against real property the levy process must start no later than within one year after the expiration of the seven year period. Although the judgment is initially effective for seven years, it can be revived for an additional seven year period. After the entry of an enforceable judgment, you can create a lien upon the defendant's property by recording a certified copy of the judgment, transcript or memorandum of judgment in the county where the judgment debtor owns real estate. The recorded judgment lien will attach to any real estate owned by the judgment debtor in the county where the recording occurred and any interest in property acquired by the judgment debtor for seven years following the judgment. If the real estate is in the judgment debtor's name individually as a tenant-in-common or as a joint tenant, it is susceptible to a levy sale. The rights of a judgment creditor will always be inferior to the rights of a holder of a prior perfected security interest in the same property; such as (1) the holder of a security interest (mortgage) on defendant's assets (2) a trustee in bankruptcy, (3) another judgment creditor. The general rule is that the order in which a creditor perfects its lien determines priority over other creditors. Exception No. 1: An exception to the general priority rule exists for mortgage refinancing. A renewal note and mortgage ordinarily maintains the priority position of the original mortgage. A mortgage lien by a new lender that refinanced your mortgage judgment debtor's prior mortgage may be entitled to the priority position of the loan that was paid off. Exception No. 2: If the debtor files bankruptcy before the judgment creditor records a certified copy of the judgment or a memorandum or transcript of judgment, the trustee will be deemed a prior perfected judgment creditor. The trustee can remove liens (including judgment liens pursuant to 735 ILCS 5/12-111) that may have been perfected within 90 days of a bankruptcy. This preference power is found at 11 USC section 547(b). Thus, even is you win the race to perfect your judgment lien, it still could be undone by the trustee. The first question for the judgment creditor is whether debtor's ownership interest constitutes sufficient equity to justify the cost of a levy. The levy will only convey the interest of the judgment debtor to the real estate. Therefore, creditors must review the interest of any co-owner, conduct a lien search, and get an appraisal. Real estate owned by a judgment debtor as a tenant by the entirety cannot be the subject of a levy sale. This is because neither a husband nor wife can independently sell his or her interest in the property, and consequently a levy sale requires that the purchaser acquire something the judgment debtor could sell. For a detail history of the tenancy-by-the-entirety statute in Illinois and its impact on creditors, see bankruptcy Judge Wedoff's opinion in In Re Chinsorn. The entirety's statute and its amendments have created a safe haven for any judgment debtor who can articulate some plausible motive for the transfer. Documentation required: The sheriff will require a copy of the recorded lien. To make the lien effective, the judgment creditor must verify the correct legal description and common address of the property to levied. This information with proof of recording, should be delivered to the sheriff of the county where the property is located. Most sheriffs will require some form of direction to conduct a levy sale. If the judgment lien is properly recorded, the sheriff will prepare a certificate of levy in the form set forth in 735 ILCS 5/12-123, which will be recorded pursuant to 735 ILCS 5/12-154. The levy should be personally served on the judgment debtor if possible. The statute does not require personal service. Although not required by statute, it is a good practice to mail or fax notice of the intended sale to all lien claimants disclosed in the title search. This should determine the validity and amount of prior liens, which will determine the amount of equity in the property. The sheriff is required to publish notice of the levy sale once a week for three successive weeks in a newspaper in the county where the property is located. A notice is also posted in three public places within the county, usually within the sheriff's office and courthouse. The notice must reflect the date, place and time of the sale and identify both the judgment creditor and debtor. If the sale is delayed for more than one day, the sheriff must post a new sale date in the same manner as the original posting. Each individual is entitled to a $7,500 exemption from levy for property owned and occupied as the individual's residence. The Courts may, according to statute, give the maximum, but no more than $15,000 in the aggregate if available as an exception no matter how many parties own and occupy the property. Prior to scheduling the sale you need to find out whether the property has enough equity to warrant the expense of a real estate levy. You will need to gather the following information: 1. Your client's records, if any, regarding
the property; Once you have that information you can determine the debtor's equity in the property. Now you can calculate a maximum bid based upon a judgment against the sole owner of the real estate. First, use the broker's appraisal to determine the liquidation value of the real estate. Second, add the following items: (1) The total of prior liens; (2) The amount of unpaid/accrued real estate taxes including amounts coming due during the six month redemption period; (3) Amount of homestead exception (maximum of two at $7,500 each); (4) The amount of sheriff's sale commission ($900 for Cook & DuPage Counties); (5) Publication expenses (approx. $500); (6) Estimated cost of eviction; (7) Cost of appraisal and title search. Third, subtract the sum of the second paragraph from the liquidation value. If the balance exceeds your judgment balance, you may be a candidate for a levy sale. After the sale and payment of costs and expenses, the sheriff will deliver to the successful purchase a certificate of sale, which should be recorded within 10 days of the sale. The homestead exemption should not be paid until after the redemption period has run. As of January 1, 2001 the levy statute requires the successful purchaser to make a "prompt" report following the expiration of the redemption period. The report is made to the court that issued the underlying judgment. It must include an affidavit which includes an appraisal of the fair market value of the property, and a list of all the liens against the property with a valuation of those liens. Notice must be given "in accordance with court rules applicable to motion generally," but must include notice to the judgment debtor. The court must then approve the sale unless there is a finding that notice "as required by law" was not given, the terms of the sale were unconscionable, the sale was conducted fraudulently or "justice was not done." The judgment debtor may redeem the property by paying the amount of the sale plus 10 percent to the sheriff within six months of the sale. The debtor will receive a certificate of redemption to record which cancels the sale. The proceeds paid to the sheriff will be delivered to the judgment creditor and applied to the judgment balance. Other judgment creditors have a right to redeem from the sale. Between three to six months after the sale, another judgment creditor may redeem by paying the redemption amount (judgment amount plus 10 percent interest) to the sheriff and delivering to the sheriff a certified copy of the judgment creditor's judgment to verify the right to redeem. This judgment creditor now stands in the place of the original levy sale purchase and is entitled to receive a certificate of sale if the judgment debtor fails to redeem within six months of that sale. The sheriff will publish for a new levy sale based upon the redeeming judgment creditor's judgment. If no redemption is made, the successful purchase (or redeeming creditor) may request that a deed be issued any time within 5 years after the expiration of the redemption period. If the deed is not picked up within that time, the certificate of purchase is void. The sheriff's deed conveys only the judgment debtor's right to title and interest in and to the real estate. All prior liens remain in effect and must be satisfied by the purchaser. People & Places... 10/4/02 Ben E. King Concert. Paramount Theatre, 23 E. Galena Blvd., Aurora (630-896-6666) Formerly with The Drifters, hear his classic hits - Stand By Me, This Magic Moment, Save the Last Dance for Me, More, There Goes My Baby, ++ Tickets: $30. 10/17-20/02 Weed Ladies Sale. Naper Settlement, 523 S. Webster, Naperville (630-420-6010) Seasonal arrangements, wreaths, dried bouquets and swags. No fee. 10/24-27/02 Carol King Collections Craft Sale. DuPage Co. Fairgrounds, 2015 W. Manchester Rd., Wheaton (668-6636). Finest quality holiday crafts. One of the best shows in the area. 11-02-02 Cabaret. Paramount Theatre, 23 E. Galena Blvd., Aurora (630-896-6666) Tickets: $35. 11/08-09/02 Wheaton Jr. Women's Craft Sale. DuPage Co. Fairgrounds, 2015 W. Manchester Rd., Wheaton (630-668-6636). 11/21-24/02 Autumn Festival Arts & Crafts Fair, Odeum, 1033 N. Villa Ave., Villa Park (630-941-9292). Top quality crafts, over 500 exhibitors from 30 states. 11/22-24/02 Geodon Gems & Mineral Show. DuPage Co. Fairgrounds, 2015 W. Manchester Rd., Wheaton (630-668-6636). A wonderful place to Christmas shop. There is a little something for everyone. 12/08-09/02 The Christmas Toy Shop presented by AlphaBet Soup. Paramount Theatre, 23 E. Galena Blvd., Aurora (630-896-6666) A touching holiday story about a Christmas that almost wasn't. A singing & dancing show for the entire family. What's Cookin... PECAN DREAM DESERT SECOND LAYER: THIRD LAYER: FOURTH LAYER: Top Ten Things Only Women Understand... 10. Cats' facial expressions. For information contact Gloria Norton at DuPage County Bar Association, 126 S. County Farm Road, Wheaton, IL 60187-4597, Telephone 630-653-7779, Fax to 630-653-7870 or E-Mail to: gnorton@dcba.org. |
