Indiana Judgment Liens against Real Estate
In Indiana, when a judgment for monetary damages is entered in favor of a plaintiff, that judgment automatically becomes a lien for the judgment amount upon any and all real estate owned by the judgment defendant in the county where the judgment was entered. See, Ind. Code § 34-55-9-2. If the plaintiff knows or has reason to suspect that the judgment defendant owns real estate in any other Indiana county, the plaintiff can have the judgment indexed in such other county by delivering or mailing a certified copy of the judgment to the clerk of such county. See, Ind. Code § 33-32-3-2(d). Indexing the judgment in another Indiana county only costs $3 per county. To obtain a judgment lien against non-Indiana real estate, the plaintiff will need to consult the laws of the applicable State because each State has its own procedure for domesticating foreign judgments.
The judgment lien against real estate becomes effective automatically upon indexing of the judgment and remains effective for 10 years. See, Ind. Code § 34-55-9-2. A judgment lien takes priority as of the time of its indexing in the same manner that any other lien takes priority. Therefore, liens already existing when the judgment is indexed will have priority over the judgment lien, while the judgment lien will have priority over any subsequently recorded liens against the property, including any subsequently recorded mortgage liens.
Even if the plaintiff takes no action to enforce the judgment lien during the 10 years that it is effective, the lien can still benefit the plaintiff. If the judgment defendant attempts to sell the property while the lien is in place, the judgment defendant will need a release of the judgment lien in order to pass clean title to the buyer. This is true even if there is no equity in the property for the judgment lien (i.e. the amount of senior liens exceed the value of the property). If the plaintiff agrees to release the judgment lien to facilitate a sale (presumably after receiving payment from the judgment defendant to do so), the plaintiff should record a partial release of the judgment lien that only releases the judgment lien as to the property sold so that the plaintiff’s judgment lien remains effective as against any other real estate owned by the debtor in that county.
While the foregoing scenario can lead to the plaintiff recovering at least a portion of the judgment amount, it is more likely that a judgment creditor will recover on a judgment lien by having real estate subject to the judgment lien sold. Indiana Trial Rule 69 provides two different procedures for having property subject to a judgment lien sold.
Under Indiana Trial Rule 69(A), the court that entered the judgment can enter a writ of execution to have the property sold. The writ of execution is an order that directs the sheriff to sell the real estate. The real estate would be sold through an execution sale subject to any other senior liens against the property (i.e. if there is a mortgage against the property when the judgment lien attached to the real estate, the buyer will take the property subject to the mortgage). An execution sale against real estate may not be held sooner than 6 months after the date that the judgment became a lien against the property.
Alternatively, Indiana Trial Rule 69(C) provides that a plaintiff can foreclose a judgment lien pursuant to the procedure created by Indiana law for foreclosing a mortgage. This requires the plaintiff to file a separate foreclosure action that names the judgment defendant and any lien holders as parties to the action. The plaintiff will not need to prove for a second time that the judgment defendant is indebted to the plaintiff. Instead, the foreclosure action is only seeking an in rem judgment against the real estate owned by the judgment defendant and a determination of the relative priority of the liens against the real estate.
Whether it is best to proceed under Rule 69(A) or Rule 69(C) will depend on the amount of the plaintiff’s judgment, the value of the property, and the relative lien position of the judgment lien vis a vis any mortgage holders and/or other lien holders. One important distinction between Rule 69(A) and Rule 69(C) is that the property must be appraised and sold for at least 2/3rd of the appraised value in a Rule 69(A) execution sale, while Rule 69(C) specifically provides that the sale of property in a judgment lien foreclosure action can be “without valuation or appraisement” even though Ind. Code § 34-55-4-1 requires valuation and appraisement in mortgage foreclosure actions.