Judicial foreclosure is an effective legal tool to collect the money someone owes you. Whether you won a judgment or have a mechanic’s lien, a judicial foreclosure could be the legal action that helps you finally get paid.
In this article and accompanying video, you’ll learn about the judicial foreclosure process and find out if you have the correct documents to move forward with one.
Talk to Our Litigation Attorneys About Filing a Judicial Foreclosure
If you have been unsuccessful in collecting the money someone owes you, it’s time to talk to a litigation attorney about whether a judicial foreclosure is right for you. Call 303-688-0944 to schedule some time to meet with one of our attorneys experienced in handling judicial foreclosures.
Who May Benefit from Filing a Judicial Foreclosure
Judicial foreclosures can help certain individuals recover unpaid debts. People who have been awarded a judgment in court, business owners with a mechanic’s lien, and “any other person claiming the right to a statutory lien on real property” are all good candidates for exercising a judicial foreclosure. C.R.S. 38-38-306 (1)
Pros & Cons of Judicial Foreclosures
Get your debt paid. Ultimately, most people do not want to lose their homes, so they end up paying the debt they owe you before the house is sold at a foreclosure auction.
Collect attorney’s fees. Another upside to judicial foreclosures is you can get your attorney fees and other costs associated with your matter paid by the debtor.
Results are not always immediate. The judicial foreclosure process can take time, and there’s a chance the homeowner will want to fight it in court.
Overall, our attorneys have found judicial foreclosures to be extremely effective and beneficial for our clients.
Key Things to Know About Judicial Foreclosure
If You Have a Judgment
It’s a fairly common scenario: Someone is awarded a judgment in court. They can’t wait to receive their rightfully owed money, but their excitement quickly wanes when they discover trying to collect the debt is like drawing blood from a turnip — it’s impossible.
If you’re in a similar situation, it’s time to find out if a judicial foreclosure is your best option. By reviewing the facts of your case, a seasoned litigation attorney can tell you whether pursuing a judicial foreclosure is right for you.
Your attorney will want to know if:
- The debtor owns real property, like a house or a commercial building. (In fact, your attorney can look into this for you.)
- You must have a valid judgment.
Good-to-Know Info About Judgments
County court judgments are good for 6 years then they must be renewed. District court judgments are valid for 20 years before you have to renew them. There are no limits on how many times you can renew a judgment. You can still collect on an old judgment as long as it is valid.
Additionally, your judgment must be recorded with the county recorder where the debtor owns the property. Your attorney can assist you with this step, too.
If You Have a Mechanic’s Lien
Many times, a homeowner who owes a contractor money will pay up when they find out the contractor intends to file a lien against their house. But even that does not get the attention of some homeowners. When that happens you may have to resort to actually enforcing the mechanic’s lien with a judicial foreclosure.
Mechanic’s Liens Have Tighter Timelines
There’s no time to waste if you want to file a judicial foreclosure with a mechanic’s lien. You must file the lawsuit within six months after the final day you performed work or provided materials for the job.
The Judicial Foreclosure Process
Step One: Secure a Decree of Foreclosure
To get the foreclosure process rolling, you must obtain a decree of foreclosure from the court. The decree of foreclosure allows you to move on to the following step which is the sheriff’s sale. But let’s not get ahead of ourselves. Let’s explore how you go about getting a foreclosure decree.
Path to a Foreclosure Decree
File the lawsuit. A judicial foreclosure begins with suing your debtor. You must file the lawsuit in district court because you are dealing with real property.
The public is notified. A lis pendens is recorded against the property. A lis pendens is a lien that prevents the homeowner from selling their house before the debt is paid while the lawsuit is ongoing. It also lets other interested parties know that litigation is pending against the homeowner.
The property owner is notified. The individual who owns the property is served the lawsuit. If the property owner lives in Colorado, he or she has 21 days to file a response. If the individual lives out of state that timeframe increases to 35 days.
This is the juncture where your lawsuit goes one of two ways: you go to trial or you don’t.
The property owner answers the lawsuit. If this happens, a trial date is set. At trial, you must prove you have a valid judgment. If the court finds that you do, it will issue a decree of foreclosure.
The property owner does not answer the lawsuit. If the property owner does not answer the lawsuit or does not answer it in time, then the court can issue a default judgment and order a foreclosure decree.
Step Two: The Sheriff’s Sale
Assuming you receive the foreclosure notice through a default judgment or by prevailing at trial, it’s time to move on to the foreclosure through the sheriff’s sale, which the court orders the sheriff’s department to perform.
Property Owner Gets a Final Chance to Pay
Before the sheriff’s sale occurs, the property owner has one last opportunity to pay the money they owe you before their home is sold at auction. In legal terms, this is called curing the debt.
The homeowner must file a written notice of intent to cure “no later than 15 calendar days prior to the date of the sale.” C.R.S. 38-38-104 (1)
As we mentioned earlier in the article, homeowners do this quite often. Having the debt cured before the auction is a positive outcome. It gets you paid and saves you the hassle of dealing with the sheriff’s sale.
Action You Must Take if You Get an Intent to Cure Notice
If you are informed that the person who owes you money wants to pay you, state law requires you or your attorney to provide the amount it will take the individual to pay off the debt.
You may also collect interest from the property owner. However, you can only claim interest at the regular rate, not the default rate. If the property owner fails to cure the debt after all, and the sheriff’s sale moves forward, then you can charge interest at the default rate. C.R.S. 38-38-104 (2)(c)
Also, be sure to hold on to all receipts and other documentation that supports the amount of debt you claim they owe you. The debtor is entitled to request this information after he or she pays you. C.R.S. 38-38-104 (2)(a)
Deadline to Cure the Debt
The person who intends to cure the debt has until noon on the day before the sheriff’s sale to pay the full amount owed, including your costs and fees. C.R.S. 38-38-104 (2)(b)
How the Sheriff’s Sale Works
You Kick Off the Bidding
Since you initiated the foreclosure, you will provide what’s called a credit bid. This bid must be submitted “no later than 12 noon on the second business day prior to the date of sale.” C.R.S. 38-38-106 (1)
If you miss the bid deadline, the auction of the property will be postponed for one week.
Generally speaking, credit bids cover everything the debtor owes you: the amount of the judgment or mechanic’s lien, costs, attorney fees, interest, and so on. Your attorney will assist you with developing an appropriate bid.
Highest Bidder Purchases the Property
After considering all of the bids, the sheriff notifies the highest bidder that he or she has purchased the property. This may or may not be you.
Payment After the Property is Auctioned Off
Once the property is sold, all interested parties are paid. But, as you might expect, there is a payment priority order, and you probably will not be at the top of that list. Here’s why: A judgment lien is considered a junior lien. That means senior debts, like a first mortgage, are handled before anything else. Next paid are any liens that were attached to the property before yours.
Colorado Homestead Exemption Affects Judicial Foreclosure
The Colorado homestead exemption can effect a judicial foreclosure if the property owner is occupying the house. Your attorney will explain any effects the homestead exemption may have on your case.
We Can Help You Collect a Judgment
As you can see, the process to collect a judgment or other lien through judicial foreclosure is time-dependent and complex. Our experienced Litigation Team will help you every step of the way to ensure a seamless process so you can collect your rightful money. Call 303-688-0944 for a free case assessment.