This lien should be treated like a second mortgage or anything else that's not a first lien. If a foreclosure or short sale occurs, the first is paid all funds up to the amount of the debt. If there is money left over, it would go to the next creditor, and so on. BUT, if there's no money to pay the second mortgage, then it (second) becomes an UNSECURED lien and the lien is NO LONGER a lien against the property - - instead, it's a lien against you. That's the same way this judgment lien would be treated.
What needs to be understood is that the judgment lien is against you - and is not specifically a lien against this property. It's like a federal tax lien. It's not a lien against a person's real estate. Instead, it's against the person. If a person's property is sold, a judgment creditor, IRS
, etc. only gets paid if there's money left from the transaction.
Also, the lien DOES NOT run with the real property. It stays with you. So, there shouldn't be an issue with a cloud because a judgment lien can only capture money IF there's money left to pay after the priority lienholders are paid in full.
Because you're in a short sale, there's not even enough money to pay the first mortgage, so there should really be no issue with this judgment creditor. The creditor won't be paid and the lien will stay against you - not against the property being sold.
If the realtor doesn't see this, you may need to consult a bankruptcy or debt relief attorney to explain this to the parties involved.
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