How do you sell your home if there's a judgement against you?

Rick: I had a question regarding the homestead exemption, it being judgment proof of creditors. If a person gets a civil judgment, files it, and then the judgment presumably is collecting interest, if one sells that property, how, in your experience, does the judgment typically get satisfied at the time of the sale?

Attorney Tom Olsen: Rick, that's a great question. Let's talk about this. We just talked about that your homestead here in the state of Florida is protected against judgment claims, and judgment liens. If somebody has sued the owner, gotten a judgment against the owner, back in the old days, Rick, when the owner sold that property, all the owner had to do was file an affidavit with the time of the closing, that this is their homestead, and then the title company could actually ignore that judgment and not be required to collect on it.

These days when the owner sells that property, there's actually a judgment against that owner, the owner has to go to court, have the court literally sign an order that this is their homestead exemption, of course, upon proof of that it's homestead exemption, and only then can the title company ignore the judgment.

Now, let's say that this was not the homestead, that this was just a piece of rental property, or commercial property that the owner's trying to sell, the title company then would reach out to you, Rick, the owner of that judgment, the holder of that judgment, the person that's owed money, and they would ask you to give them a payoff letter, where you would state on that payoff letter exactly how much is owed to you, including any partial payment credits that are given to the judgment debtor, and including any interest that's owed you on that judgment. Rick, does that answer your question for you?

Rick: Yes, sir. One follow up if, I may very briefly, are you saying, if it is the homestead, however, and you get a court order declaring it homestead, that the closing agent could still ignore the judgment, and pay the homeowner who sold the property the full amount of the sale price?

Attorney Tom Olsen: That's exactly what I'm saying Rick. You got it.

Rick: That's very helpful. Thank you kindly. Thank you for all you doing. Thank you for a whole 35 years. Boy, that's tremendous, and I'm very proud of you guys over there. Thank you very much.

Attorney Tom Olsen: Thank you, Rick. You're making me smile for those kind words. Appreciate it.

Attorney Chris Merrill: Appreciate it.

Attorney Tom Olsen: Chrissy, what Rick just-- he sounds a little bit surprised. Let's just follow up with that and say this, that here in the state of Florida, it is very hard to collect money from people. This homestead exemption is just one of the many reasons. When people say, "Tom, I want to sue," well, I tell people, look, getting a judgment against somebody, a piece of paper that says that somebody owes you money, that's the easy part. Collecting on it, that's practically the impossible part.

Attorney Chris Merrill: Exactly. Correct.

Attorney Tom Olsen: If you are suing somebody that they have, other than the home they live in, if they got rental property, investment property, then you might very well get a good chance of collecting that judgment, but guess what? People that own other properties, generally, they're not getting sued anyway.

Attorney Chris Merrill: Exactly. Think about it too, is that the judgment can also go against their credit, however, I'm sure many people like Rick are surprised to hear that again, in particular with the homestead, that then the judgment would not have to be taken out of the sale of the homestead property.

Attorney Tom Olsen: Let's be clear about that. You're saying that if Rick sued somebody, and has a judgment against somebody, that somebody managed to sell their home, and Rick did not get paid, but what you're saying is that the credit reporting agencies will pick up that judgment. The next time that that judgment debtor tries to borrow money, even if they're trying to buy another house, that lender's going to pick up that judgment and say, "We're not loaning you money until you satisfy that judgment."?

Attorney Chris Merrill: Absolutely.

Attorney Tom Olsen: There you go.

Attorney Chris Merrill: Absolutely, because part of the way that they are at least able to say, as the person who was not repaid this money that they owed, at least they have one, avenue and that is, "I may not get my money, but I will prevent and make it difficult for them, because then think about it, now they want to go buy another home. Now, what happens is the only way it would be for them to negotiate and pay it off, and then to negotiate from there to even try to get it off their credit.

Tom: Good point. Excellent.