A Judgment Lien Can Land Like a Fly on Your Marital Home and Rot Your Equity~4 min read

So, you’re getting divorced. It is a difficult situation, but on the positive side you and your former spouse have finally found something you can agree on, you both shouldn’t be married to each other anymore.

You both negotiate a property settlement together. The judge signs the decree. You both agree that the marital home will eventually be sold, and you both will receive your fair share of the equity from that sale, and presumably everyone can then move forward with their lives after a difficult separation.

Divorce decrees are certainly optimistic little documents in family law. They ask former spouses to promise, in one form or another, that each will do exactly what they agreed to do. Sell the house. Pay the debts assigned to them. Cooperate. And move on.

The law, by contrast, has been around far too long to take anyone at their word. It waits patiently, until everyone has finished making their promises, to politely raise a hand from the back of the courtroom and ask:

One might reasonably assume their spouse has to disclose if they’re being sued during their divorce proceedings. Well…not necessarily. While Rule 1.25-A requires extensive financial disclosures, it does not require a party to disclose every pending civil lawsuit.

Notably, a pending lawsuit, however, is not yet an established liability. That’s because a pending lawsuit is little more than a legal “maybe.” It might result in a judgment. It might be dismissed. It might settle. Until then, it isn’t an actual liability in the way a judgment or other enforceable debt is. Consequently, nothing in Rule 1.25-A requires a party to disclose every pending lawsuit merely because it has the potential to become a legal liability.

And that’s only half the problem. Under many of New Hampshire’s notice statutes, a creditor suing your former spouse or your former spouse’s business has no obligation to name you as a defendant just because your name also appears on the deed to the marital home. This is especially problematic when only one spouse remains in the marital home and the other does not.

That means a lawsuit affecting your spouse’s interest in the property can proceed entirely without your knowledge. By the time you do discover it, the creditor may already have obtained a judgment and recorded their lien against your spouse’s interest.

At first blush, this all sounds like someone else’s headache. Your former spouse getting sued sounds like it should be entirely your former spouse’s problem. After all, the lawsuit isn’t against you. The judgment isn’t against you. The debt isn’t technically yours to pay.

So why should you care?

Judgment liens matter because there is a difference between being entitled to something and actually receiving it. A divorce decree may tell you what you are ultimately entitled to receive, but it does not necessarily guarantee them.

It’s that period of time before the home is actually sold which matters most. The longer the home remains unsold, the more opportunities arise for things to go awry. Your former spouse may stop paying their creditors and their creditors may file suit, win, and record that judgment lien against your marital property.

The Where Did My Half Go Example

Bonnie and Clyde divorce. Their decree says they’ll split the equity when the house is eventually sold. Bonnie also owes Clyde child support.

They decide to wait to sell the home. During that time, a creditor sues Bonnie and records a lien against her interest in the marital property.

When the house is finally sold, the creditor gets paid before Clyde because the creditor recorded that lien first. It doesn’t matter that Bonnie owed Clyde child support before the lawsuit was filed. Bonnie’s share of the equity must first satisfy the judgment lien. If anything is left over, Bonnie can apply that remainder towards paying her child support arrearage.

Now, change just one fact: Clyde records a child support lien before the creditor records their judgement lien. Bonnie’s equity in the home now goes to paying Clyde the child support she owes him first, and then the creditor will be paid with whatever money is leftover.

Same house. Same equity. Same debts. The only thing that changed was who got to the Registry of Deeds first. This can lead to a harsh result, and necessitates a good lawyer on your side to advocate for you.

Whether you’re negotiating a divorce settlement, dealing with unpaid child support, or trying to protect your interest in the marital home, these issues are often avoidable with proper planning. If you need assistance navigating your divorce or ensuring your property rights are protected, the family law attorneys at Parnell, Michels & McKay have the experience necessary to assist you. Contact us today.