Judgment Lien and Tax LienThe short answer is that searching Tax Liens and Judgment Liens while conducting your due diligence might save you money and hassle, but let’s back up and explain the reasoning.

The first thing to understand is that both Tax Liens and Judgment Liens have priority relative to other types of liens, such as a UCC, based on the date of its filing, and this affects your ability to collect. For example, if your debtor has an outstanding Tax or Judgment Lien filed against him, those liens will most likely prime a subsequent perfected UCC in the event of a default.

In addition to affecting priority, it’s important to note that both Judgment and Tax Liens are involuntary liens, which means the debtor has not entered into the deal willingly. Neither of these liens requires a signature from the debtor, and there is no underlying agreement to which both parties agree. A debtor should not be relied upon to disclose these liens, and it’s even possible that they are not aware the lien exists. This is why a thorough due diligence search will reveal all types of liens.

Depending on the jurisdiction, Judgment Liens or Tax Liens can be filed in either the state or the county filing office. When conducting due diligence searches, make sure that you use a service provider that’s capable of finding name variations using broad-based searching techniques.

If you’re interested in learning more about this topic, download our reference guide What Liens to Search For today.



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