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Can a creditor's lien on my house stop it from being sold in a short sale?

Roselle, IL |

I have a buyer for my house, but only as a Short Sale. After a judgement obtained against me last year, the creditor put a lien on the house. They will not recover any money by holding that lien. How can I get the lien removed so the short sale can proceed? I know I won't make any money on the sale either. But I'd prefer a Short Sale instead of a Foreclosure.

I recently got a job after being unemployed for 2 years. This creditor is now garnishing my wages. Can they legally do both of those things to me at the same time citing the same judgement case?

Thanks for the comments. I do not own any other real estate. The Short Sale Approval letter from the mortgage company clearly states "the current owner(s) are to receive $0.00 proceeds from the sale of the above property." I did not fax that document to the creditor because I don't think the details of the Short Sale are any of their business. The creditor did request my real estate attorney to fax the HUD to them. Should that suffice to prove to them they have no stake in this? I tend to think they are holding the lien just to anger me. What could a lawyer do for me?

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Attorney answers 2

Best Answer

The judgment creditor is entitled to satisfy its judgment any way it can, legally, and that includes a general judgment lien (probably what they recorded that is affecting title), wage garnishment, etc.

Here, I think the lien on your house is a general judgment lien that the creditor recorded, and is being picked up by the title company. If that is the case they may not release that lien, because it's really against your name, not the specific property, and if they let it go, then they could miss the boat on anything else in the way of real estate you may own. So as the other answerer said, you can try to convince them you have no equity, but that may not result in their releasing this kind of lien even w/ the garnishment in place.

As to closing, YES, it will hold up a short sale if the contract's already been approved by the lender for closing, since they are expecting a minimum level dollar amount, and this is something that will prevent clearance of title. If the amount is relatively insignificant they may be willing to compromise a part of it if the sale is "close" to the mortgage balance, but again they don't have to, and if they foreclosed this general lien would fall off. You may hear the term "TI" thrown at you, which is a title indemnity fund, but that would require posting the whole balance due plus some, up to 150%, and if you had the $ presumably you'd pay this off.

You really need to consider an attorney to middle this for you......

The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is currently licensed to practice law actively only in the State of Illinois, inactively in Florida. Responses are based solely on Illinois law unless stated otherwise.


It is possible for the creditor with a lien to stop a short sale if the Lender (bank) requires a warranty deed as part of the sale. You may have to negotiate a deal with the creditor to get a release of the lien prior to the sale. If you can negotiate a quit claim deed with the lender then the lender takes the property "as is" inclusive of the liens.

Use the wage garnishment as an argument that the creditor is receiving his money that way and that there is no equity in the property.

This communication is for informational purposes only and does not constitute legal advice nor establish an attorney client relationship.