Gadsden County Clerk & Recorder of Deeds | eRecording Online Here!! | Fees | Phone | FL.

Clerk of the Circuit Court
Gadsden County Courthouse
10 E. Jefferson St
P.O. Box 1649
Quincy, FL 32351
(850) 875-8601

Gadsden County Clerk / Comptroller and Registrar of Titles office invites you to e-Record your title documents ONLINE! Liens, Deeds, Mortgages, Assignments, Releases and more! Save yourself a trip to county offices. Go Green this Year! Credit Cards Accepted! Online Checks!

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Documents that have traditionally been delivered or mailed to the Clerk & comptroller of Court by runner, express mail or courier services can now be processed with e-Recording, simplifying and accelerating all aspects of the recording process. The most commonly e-Recorded documents are Mechanic’s Liens, Notices, Release of Lien, Deeds, Mortgages, Assignment of Mortgages, Notice of Commencements, and Satisfactions of Mortgages.
Documents that have traditionally been delivered or mailed to the Clerk & comptroller of Court by runner, express mail or courier services can now be processed with e-Recording, simplifying and accelerating all aspects of the recording process. The most commonly e-Recorded documents are Mechanic’s Liens, Notices, Release of Lien, Deeds, Mortgages, Assignment of Mortgages, Notice of Commencements, and Satisfactions of Mortgages.

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Different Lien Types Provide Creditors with Different Rights
Creditors come in two basic types: secured and unsecured. Although the amount of the debt may be the same, the remedies available to the creditor are very different. Secured creditors have a claim against a specific asset, whereas unsecured creditors do not.
Creditors can be unsecured or secured. An unsecured, or general, creditor has a general claim against a debtor–this claim is not secured by any particular asset of the debtor. An unsecured creditor has the weakest claim, which may go unpaid in a bankruptcy proceeding. However, an unsecured creditor may become a secured creditor after a lawsuit and judgment. A secured creditor, who has an interest (referred to as a lien) on a particular asset, can use the court system to seize the asset and to satisfy the debt. This clearly presents a significant risk for the business owner.
Liens Enable Creditors to Assert Rights Over Property
Unless the debtor is prudent and has taken measures to safeguard his assets, there is a risk that the creditors can seize assets and take your wealth. In order to know if your assets are at risk, it is imperative that you have an understanding of the different types of liens you may encounter as a small business owner:
• Consensual
o Purchase-Money Security Liens
o Non-Purchase-Money Security Liens
• Statutory
o Mechanic’s Liens
o Tax Liens
• Judgment
Once we discuss the different types of liens, we’ll then examine how creditors might seek to get your assets through these types of liens, and what you can do, as an individual and as a small business owner, to maximize your protection against those creditors. The strategies outlined will address a broad spectrum of topics, from forms of property ownership to structuring debt to minimize exposure.
Consensual Liens Are Voluntary
As the name implies, consensual liens are those to which you voluntarily consent, as a result of a loan or other advance of credit. The property purchased secures the buyer’s obligation to pay for the property. One common example is the residential mortgage: a home buyer consents to a bank taking a security interest in the home when a mortgage is obtained. Similarly, a security interest also is created when a car dealer arranges for financing for a car buyer.
There are two broad classes of consensual liens:
• Purchase-Money Security Interest Liens. Here, the creditor extends credit to the debtor specifically for the purchase of the property that secures the debt. Examples include a first mortgage on a home, a car loan, and situations in which the seller finances the purchase of property, such as furniture, through a credit agreement.
• Non-Purchase-Money Security Interest Liens. Here, the debtor puts up property he or she already owns as collateral for a loan. The loan proceeds are then used to pay expenses (or perhaps to buy other property). Examples include a second mortgage (or refinancing of a mortgage) on a home or a loan used to pay operating expenses with previously owned office equipment put up as collateral.
Both types of consensual liens are usually non-possessory. This means that the creditor does not take or retain possession of the property; rather, the debtor takes, or retains, possession of the property. However, it’s possible for either type of consensual lien to be possessory. In that case, the creditor takes possession of the collateral. A loan from a pawnbroker, for example, usually would create a possessory, non-purchase-money security interest lien in the collateral.
While this seems very straightforward, the type of debt can have a large impact on the creditor’s rights if a debtor defaults. The rules vary from state to state, but characteristics of a debt are critical to understand if assets are to be protected. Issues include:
• Who is holding the property that secures the debt: the debtor or the creditor? In a car loan, the debtor has possession of the property. When a loan is obtained from a pawnshop, the creditor has possession of the property securing the loan.
• Was the debt incurred to purchase property or not? For example, a first mortgage loan is a purchase money loan since the proceeds were used to purchase a residence. In contrast, a refinancing loan is not a purchase money loan. The homeowner already owned the property.
• What is the nature of the property to which the lien is attached? This is often the essential inquiry when it comes to asset protection. The states, as well as the federal government, have a wide variety of laws relating to what assets are protected from creditors and how they are protected. The primary mechanism for protecting selected assets is a concept called exemptions. In essence, the law may declare that certain property simply cannot be seized by a creditor.
The other common types of liens are statutory liens and judgment liens.
Statutory and Judgment Liens Arise by Operation of Law
In addition to consensual liens, there are many different types of liens that creditors can use to get at your assets to satisfy a debt. In certain circumstances, creditors obtain security interests by the operation of state (or federal) laws. These liens include:
• Mechanic’s Liens. This type of lien arises when a contractor or mechanic performs work on property and is not paid. Examples include a contractor who installs a furnace in a home, or an auto mechanic who performs repairs to a car. This lien is a security interest in the property. If the owner tries to sell the property, the debtor will have a secured interest in the portion of the proceeds needed to pay the debt. In addition, having a mechanic’s lien can delay or prevent the sale of real property until debt is satisfied and the lien released.
• Tax Liens. This type of lien is placed against property by the local, state or federal government, as authorized by statute, for delinquent taxes, including property, income and estate taxes.
Judgment Liens Arise As a Result of a Lawsuit
Of the three types of liens (consensual, statutory and judgment,) the judgment lien is the most dangerous form, but one which the informed business owner may be able to eliminate. A judicial lien is created when a court grants a creditor an interest in the debtor’s property, after a court judgment.
Judgment liens can arise in a wide variety of circumstances–basically, any incident that can land you in court can end up generating a judgment lien. For example, if you are driving negligently and injure someone in an accident, the injured person may to sue for damages. To the extent that your insurance doesn’t cover the judgment, a judicial lien may be placed against the your property to secure payment of the claim to the injured party.
A plaintiff who obtains a monetary judgment is termed a “judgment creditor.” The defendant becomes a “judgment debtor.” The judgment in the lawsuit provides the basis for the lien. If the debt is not paid, the judgment creditor can then seek to enforce (or execute) the judgment. This can be accomplished by garnishing wages, seizing a bank account, or placing a lien against the debtor’s property. The lien is the first step by the judgment creditor in a process that will culminate in a sale of the attached property, to satisfy the judgment debt.
Any lien placed on the defendant’s assets as a result of a court judgment is known as a judgment lien. If a lien were placed on a home, the judgment creditor could then seek to foreclose on the property, in the same way a mortgage holder such as a bank could foreclose if it were not paid.
In this section, the term “judgment lien” is used in its strictest sense: a lien attributed to a court judgment, where the court judgment itself is the basis for the lien. An example would be a plaintiff who is awarded a monetary judgment against a defendant in a lawsuit based on negligence, and who then is granted an order of attachment against the debtor’s property.
In contrast, this definition excludes a judgment based on a pre-existing lien (i.e., a prior consensual lien or statutory lien). Thus, for example, this definition would exclude a judgment in a mortgage foreclosure. This distinction is critically important in discerning what types of liens against exempt property can be eliminated.
Battling Liens Against You
Asset protection requires that you understand how liens arise and what property is protected from the reach of your creditors by federal or state law. Many times, the fact that your assets are exempt from seizure makes a creditor reconsider filing a lawsuit against you.
is a good offense.” This definitely holds true for asset protection. In addition to shielding your assets when attacked, asset protection planning has another ancillary benefit that serves your goals: the more judgment-proof you make yourself, the less likely it will be that a creditor will bother to pursue a case against you., Or at the least, you may be able to influence a settlement, possibly sooner rather than later.
Avoiding Liens Through the Power of Persuasion
Many times, judicial liens can be avoided through the power of persuasion. That is, you may be able to avoid a lien by convincing the other party that any lawsuit would be a waste of time. The amount of time and money saved in avoiding litigation is substantial!
In a court proceeding, there are three parts to a lawsuit:
• factually proving the elements of the case (e.g., negligence),
• proving the existence and amount of monetary damages, and
• collecting the judgment.
The plaintiff has the burden in each of these three parts.
In many cases, the first part is not an issue. For example, if an employee making a delivery runs into the back of a vehicle stopped at a red light, there really is no issue as to whether the employee was negligent: The employee was negligent. However, the amount of monetary damages suffered will almost always be an issue, but the court will eventually determine the amount.
Of the three burdens the plaintiff carries, collecting a judgment can be the most difficult, particularly where there are no assets to attach–either because there are no significant assets, or all of the assets are protected by exemptions and other means.
Judgments expire. Most states provide that a judgment expires after 10 to 20 years. This may seem like a long time. However, judgment creditors rarely continue to pursue the collection of a judgment after an initial attempt fails when they realize that the effort will be fruitless.
In fact, the proceedings may stop far short of judgment. If someone with a claim learns that the other party has no reachable assets, usually the matter will be dropped, and no lawsuit initiated. Generally, few lawyers will take a case on a contingent fee basis for a plaintiff if it’s clear that the defendant doesn’t have any collectible assets (if they are “judgment proof.”) Thus, the plaintiff will be faced with the prospect of paying his or her attorney by the hour (at rates of $150 and upward per hour), with the likelihood that he or she will collect nothing. Faced with these dim prospects, even individuals who would otherwise sue on principle will usually choose not to pursue the matter further.
Informing the other party that the lawsuit will be fruitless, before it is filed, can be a very effective strategy. If you do not have resources that could be reached by a judgment creditor, let the other party know immediately of your situation. Because of the costs and time involved in bringing a lawsuit, most parties will forego the claim when presented with these facts.
Warning
A word of caution is necessary, however. Phrasing can be important. Don’t elaborate on the asset protection plan you have in place. General statements usually are better. Simply tell the other party, or his or her lawyer, that you will defend against the lawsuit if necessary, but that you don’t have any assets that would be available in any event.
When questioned, simply point out that your only real asset is your home (or your ERISA-qualified retirement plan), which is exempt. Tell the other party that you will vigorously defend against the lawsuit, but it will be a waste of time anyway. If you do not feel comfortable doing this, hire a lawyer. The fees spent will usually be worth the results achieved in this situation.

If you are not successful at discouraging a legal action, or if you are already facing liens against your property, it is important to examine whether those liens can be invalidated. If not, you need to consider whether they can be eliminated or reduced.
Lien Defects or FTC Rules Can Invalidate Liens
Your strategy for attacking a lien placed against your assets and your chances of success depend upon the type of lien that you are facing. If the lien was not properly created, you may be able to invalidate it. But, most likely, you will need to challenge it based on the fact the assets are exempt from lien.
Search for Defective Lien Creation or Perfection
When battling liens, a small business owner may be able to win by establishing that the lien is invalid. Liens that are invalid cannot impair any assets: it doesn’t matter whether those assets are exempt or nonexempt.
Statutory liens, such as mechanics’ liens and tax liens, are invalid unless they have been:
• filed with the appropriate government office (“perfected”), and then
• foreclosed on within a certain period of time.
The time limitations vary from state to state. In the case of mechanic’s liens, these periods are very short. Typically, these liens must be filed within 60 or 90 days after the work is performed, and then foreclosed on within one year. Tax liens usually have to be filed within 2 to 3 years, and expire after 10 or 15 years.
Even judgment liens have time limitations. Usually, judgment liens must be foreclosed on within 10 to 20 years. If any liens have not been filed, or foreclosed on, within the prescribed periods, the liens are invalid and unenforceable.
Example
Peter Jones has a contractor put a $40,000 addition on his residence, but has not yet paid the bill. Jones’ residence, worth $120,000 after the addition, is subject to a $100,000 first mortgage.
The residence is an exempt asset in Peter’s state under these facts. However, mechanics’ liens are valid, even when they impair an exempt asset.
Fortunately for Peter, the contractor failed to record his mechanic’s lien of $40,000 within 90 days of the job being completed, as required by state law.
Accordingly, the contractor’s lien is invalid and therefore of no consequence. Peter’s home is completely exempt from the claims of the contractor, based upon the mechanic’s lien statute. However, he could still be sued and ultimately subject to a judgment lien on his assets.

FTC Credit Practices Rule May Invalidate Lien
The Federal Trade Commission’s (FTC) Credit Practices Rule can be used to invalidate certain types of liens against household property. Remember, an invalid lien can be eliminated whether it is attached to exempt or nonexempt property.
Under the FTC Rule, certain non-purchase-money, non-possessory security interest liens are invalid: specifically, liens attached to household necessities and goods.
This provision affects only consumer goods and not liens on business property. Most importantly, because consumer goods often would be entitled only to limited protection as exempt assets, the rule can offer real protection.
Lien must be non-purchase-money lien. A non-purchase-money security interest lien arises where the proceeds from the debt were not used to purchase the property. In other words, this type of lien arises when you use property that you already own as collateral for a loan, the proceeds of which are used for some other purpose. Loans involving purchase-money security interest liens (where the creditor finances the purchase of the asset that is the collateral for the loan) are more common, and are not invalid under this rule.
Lien must be non-possessory. The lien must also be non-possessory to be invalid under the FTC Rule. This means that the debtor, as opposed to the creditor, has possession of the property. In contrast, an example of a possessory lien would be a pawn shop loan, where the creditor holds the collateral. Possessory liens in these types of property also remain valid under this rule.
Lien must be for household goods. The rule’s definition of household goods includes household necessities such as clothing, appliances and linens, and some items of little economic value but of unique, personal value to the owner. These may include items such as family photographs, personal papers, the family Bible, and household pets.
The following types of property are excluded from the definition of household goods:
• works of art,
• electronic entertainment equipment (except one television and one radio),
• items acquired as antiques (more than 100 years old),
• jewelry (except wedding rings),
• pianos or other musical instruments,
• boats,
• snowmobiles,
• bicycles, and
• cameras.
Liens on these types of property remain valid.
In practice, most commercial lenders and merchants will steer clear of liens that come under this rule because they are aware the liens would be invalid. However, some lenders who are either unscrupulous or ignorant of the rule may try to attach a lien to these assets. Therefore, you should be aware that liens that fall within the rule are invalid, and thus cannot impair any exempt or nonexempt assets.
Non-purchase-money, non-possessory liens on household items and certain other property can be eliminated in some bankruptcy proceedings as well.
Liens Can Not Attach to Exempt Assets
When battling liens against you, the ability to eliminate judgment liens by establishing that the assets are exempt can spell the difference between financial ruin and success.
Generally, a lien can be eliminated only if three conditions are met:
1. the lien is a type of lien that can be eliminated;
2. the lien is against a class of assets known as exempt; and
3. the amount of the lien impairs the exemption.
Determine the Type of Lien
The first task is to determine whether liens are the type that can be eliminated. This is determined under the law of your state or under federal bankruptcy law.
As a general rule, consensual liens and statutory liens cannot be eliminated, even when they are attached to protected assets. In contrast, when a creditor attempts to enforce a judgment lien against your protected property, in a state court or bankruptcy proceeding, that lien may be invalidated or eliminated. Alternatively, you may be able to bifurcate the lien, stripping away some of its value, in bankruptcy court.
Statutory and consensual liens can effectively nullify the idea of “exempt assets” granted under the law. The result is really no different than if the asset were not classified as exempt. Clearly, this understanding is important, as an examination of the asset exemption tables alone can lead to a conclusion that an asset is exempt and thus protected, when, in fact, it is fully subject to the claims of certain creditors.
Certain judgment liens cannot be eliminated. Although, most judgment liens cannot be enforced against exempt property, there are several exceptions to this rule. These exceptions generally apply across all the states and in bankruptcy proceedings.
Judgment liens arising in the following situations usually cannot be eliminated:
• alimony or child support
• an order of restitution based on a criminal case
• a judgment based on a prior consensual lien (e.g., a mortgage) or a prior statutory lien (e.g., a tax lien).
State lien exceptions are based on case law. It is surprising that most states do not expressly describe, by statute, the types of liens that can be eliminated in state court when the liens impair an exemption, as this is obviously such an important issue.
North Carolina is one of the few states that do provide clear-cut rules by statute. Other states, which typically do not have such express provisions, usually rely on court decisions, coupled with limited statutory provisions, to define the types of liens that can be eliminated. The general rules we’ve outlined above are usually good guidelines.
However, in a few states, the courts may have developed narrow exceptions to the general rules. For example, Alabama courts have ruled that a judicial lien arising from a tort judgment cannot be eliminated. While an exception such as this will be rare, you should still be aware that, due to the vagaries of the law in each state, exceptions may exist in a few instances.
Bankruptcy Law. Generally, the bankruptcy code follows the rules described above for eliminating liens that impair exempt assets. In addition, however, the code allows for the elimination of certain liens that impair exempt property that cannot be eliminated in a state court proceeding.
Warning
If you face any type of lien, don’t automatically assume it can or cannot be eliminated. Always consult an attorney. In rare instances, an exception may exist to the rules discussed above that will not allow lien elimination in your particular state.
On the other hand, sometimes an argument can be made that will allow lien elimination when it first appeared that this was not possible.

What State or Federal Exemptions Protect Assets?
If a piece of property is “exempt” it can not be seized by a creditor to pay off a debt you owe. Both federal and state governments allow debtors to keep certain items property, so that they are not left completely destitute by their creditors. Thus, you need to determine whether the asset is exempt from the reach of the judgment.
Whether you use your state’s exemptions or the federal exemptions to protect your assets depends upon your answer to these two questions:
• Are you in, or about to be in, bankruptcy?
• Does the state require that its exemptions be used, even if you are in bankruptcy?
If you are not in bankruptcy, you need to analyze your situation using your state’s asset exemption statutes. In a bankruptcy proceeding, compare the federal and state exemptions, unless the state has opted out of the federal exemptions.
State Exemptions Govern in Non-bankruptcy Cases
Each state provides its own exemptions. These exemptions are sometimes referred to as “post-judgment asset exemptions.” In a state court proceeding, after a judgment is rendered against you, you will have to rely on your own state’s exemptions.
Asset exemptions vary widely from state to state. Some states have developed reputations for writing laws that favor either debtors or creditors.
For example, Florida, Texas and Iowa have generous exemptions that favor debtors. These states provide debtors with, among other things, basically an unlimited homestead exemption. Thus, in these states, it is possible for a debtor to protect a fully owned home worth millions of dollars in either a state court proceeding or a bankruptcy proceeding. In contrast, Florida has a reputation of having laws that favor creditors. It provides a debtor with only a $15,000 homestead exemption. Florida has also opted out of the federal exemption system, so its residents don’t have the option of using the more generous federal exemptions in bankruptcy.
Warning
Changing your residence (e.g., from Florida to Texas) used to be an effective asset protection strategy because you used to only have to reside in a state for six months to claim that state’s protections.
However, the bankruptcy code was amended to provide a 730 day (two-year) waiting period. If you haven’t lived in the state for two years, then the laws of where you lived for the greater part of the six months prior to your move will apply. Needless to say, residence changes and asset conversions must be approached cautiously.

How Federal Exemptions May Govern in Bankruptcy
In a bankruptcy proceeding, certain assets are also exempt, and thus outside the reach of creditors. The federal bankruptcy law includes its own list of exemptions, which differ from the state lists. However, under the bankruptcy code, each state may allow its residents to choose between the federal bankruptcy asset exemptions and the state’s post-judgment asset exemptions, when a federal bankruptcy action is filed.
Alternatively, a state may “opt out” of the federal exemptions and give its residents only the right to use the state’s exemptions in a federal bankruptcy proceeding.
Example
John Smith forms an LLC to operate his business. Smith’s major supplier allows him to use an open account, but requires that he personally guarantee his LLC’s contract on the account.
After two years, John experiences serious financial difficulties and defaults on the open account. At that time, the balance on the account is $80,000. John’s LLC has no assets. His only personal asset is his residence, which has a value of $100,000 and a first mortgage with a balance of $40,000.
The supplier sues John personally based on his guarantee, receives a judgment of $80,000, and places a judgment lien on John’s residence in this amount.
However, John’s home state allows an asset exemption for a residence in the amount of $125,000. Thus, Smith’s residence is an exempt asset. The judgment lien cannot be enforced.

Calculating Asset Impairment to Avoid Liens
The final step in lien elimination is to calculate whether the amount of a lien actually impairs an exemption. If all of the liens encumbering the property are of a type that cannot be eliminated (e.g., consensual purchase-money security liens), there is no need to proceed with the calculation: None of the liens can be eliminated. However, once a determination is made that elimination can be done, the exact amount of the lien that can be eliminated must be calculated.
Calculation of the amount that a lien impairs an exemption becomes especially important in a bankruptcy proceeding, because there is a greater opportunity in that situation to eliminate non-purchase-money, non-possessory liens.
Liens that are dischargeable can be eliminated to the extent that they “impair” an exempt asset. The bankruptcy code provides that a lien shall be considered to impair an exemption to the extent that the sum of all the liens on the property, plus the amount of the exemption, exceeds the value of the property. As a rule, this formula also will be followed in state courts.
Another simpler way of looking at the calculation is this:
(value of property) minus (exemption amount) equals (amount of lien that cannot be eliminated)
When a particular item of property is subject to an unlimited exemption (e.g., an unlimited homestead exemption in Florida), all of the liens on the property can be eliminated (provided, of course, the liens are of a type that can be eliminated.) If the exemption is unlimited, the value of the property will equal the exemption. Thus, the formula will always yield a result of zero for the amount of the liens that cannot be eliminated.
Unfortunately, when there is a cap on the exemption amount, what appears to be a lien that can be eliminated will not be deemed to impair the exemption. Thus, an “exempt” asset may be lost.
Example
John Smith owns an item of property valued at $40,000. This property qualifies as household goods in a state that allows him a $20,000 exemption. There is a $10,000 judgment lien on the property
To determine if any of the lien can be eliminated, the amount of the exemption ($20,000) is subtracted from the value of the property ($40,000.) This leaves $20,000 in value to which a lien can attach.
None of the $10,000 can be eliminated.
If the lien was $30,000, and the property still had a value of $40,000, then $10,000 of these liens would be deemed to impair his exemption, and, thus, could be eliminated.

There can be variations among the states with respect to laws governing liens and calculation of the exemption impairment. In the last example, where the liens totaled $30,000, it may be possible in some states to eliminate the entire amount of the liens, on the grounds that elimination of liens is an all or nothing proposition: i.e., if there is any impairment of the exemption (here, impairment is calculated at $10,000), then the total amount of the liens is eliminated.
Example
John Smith personally owns an item of property that qualifies as a tool of the trade in a state that allows him to use his state’s exemption, which is $20,000. The value of the property is $40,000. Purchase-money liens on the property total $30,000. This type of lien cannot be eliminated in, or out of, a bankruptcy proceeding.
Smith suffers a judgment in the amount of $10,000 from a lawsuit for negligence. The judgment creditor places a lien on Smith’s tools of the trade. Judgment liens of this type can be eliminated. Further, the judgment lien impairs Smith’s exemption under the formula, and can be discharged.
The value of the property is $40,000, but only $20,000 is exempt. Thus, $20,000 in value can be encumbered by liens. In this case, the liens total $30,000. The purchase-money lien can not be eliminated, but the $10,000 judgment lien can be eliminated in its entirety.

In any case involving lien impairment of an exempt asset, it is wise to consult with an attorney before concluding how much of a lien can be eliminated in the particular state in question.
Work Smart
In some cases, encumbering an asset with a consensual lien may make a subsequent judgment lien dischargeable. This type of planning is discussed in our article on Effective Asset Exemption Planning

When and How Is Lien Impairment Calculated?
Most states calculate lien impairment only when there is an attempt at a forced sale of the property (i.e., foreclosure of the lien). In some states, however, the calculation may be done at the time the property is attached. In this situation, the judgment debtor may be able to have the lien removed in advance of any foreclosure proceeding. This would allow the owner to sell the property free of the judgment lien.
For the most part, judgment liens will represent the most significant example of liens that can be eliminated when they impair an exemption. But the fact that a judgment lien is usually valid for 10 to 20 years can have planning implications.
A crafty judgment creditor could attach a debtor’s home while the home was exempt, but wait to foreclose until the value of the home went up and the amount of the first mortgage went down, so that, according the formula used to calculate lien impairment, the judgment lien no longer impaired the exemption.
In that case, the best solution for the debtor may be a Chapter 7 bankruptcy proceeding. There, calculation is determined as of the date the proceeding is filed. This strategy eliminates the waiting game that some creditors may play.
Of course, in states such as Florida with an unlimited exemption for residences, this strategy would not be necessary, as the home will always remain immune from judicial liens, regardless of how long the judgment creditor waits.
Note, however, that the Chapter 7 filing also eliminates a related problem. If a judgment creditor places a lien on property (e.g., a home), the debtor will find it impossible to sell the property. Because liens run with the property, any buyer would take the property subject to the judgment lien. Thus, there would be no buyers. A bankruptcy proceeding terminates the judgment lien, which allows the owner to sell the property at a later date.
The following case study illustrates different results due to specific state laws.
Case Study
Sheila Wagner owns a residence worth $150,000 with a first mortgage of $100,000. Her home state exempts a residence in the amount of $125,000.
A judgment is rendered against Wagner in the amount of $80,000. At this time, the judgment creditor cannot foreclose on the property because the lien impairs the exemption, and could be eliminated: the value of the residence, $150,000, less the exemption, $125,000, equals the amount of liens that cannot be eliminated, $25,000. Already, the first mortgage exceeds this amount. Thus, the judicial lien can be eliminated in its entirety.
Now let’s say that 10 years later the home is worth $250,000 and the first mortgage totals $30,000. The results are different: the value of the residence, $250,000, less the exemption, $125,000, equals the amount of liens that cannot be eliminated, $125,000. The first mortgage totals only $30,000. Thus, another $95,000 of liens cannot be eliminated ($125,000 less $30,000). This means that no part of the judicial lien can be eliminated, and Wagner will lose her home to foreclosure.
In this situation, Wagner should have considered filing a Chapter 7 bankruptcy proceeding 10 years earlier, when the entire judicial lien could have been eliminated.
Now let’s say that Wagner is a Florida resident. Florida has an unlimited exemption for a residence.
Due to the unlimited exemption, the home will always be exempt. A waiting strategy by a judgment creditor would be ineffective. The value of the home, and the value of the exemption, will always be equal. As a result, the calculation will always result in the full value of the judicial lien being subject to elimination.
In this situation, Wagner would only need to consider a bankruptcy filing if she were interested in selling the home, and she were unable to have the lien removed before a forced sale of the property by the judgment creditor. However, luckily for her, Florida is one of the states that provide that creditors cannot attach an exempt asset. Judgment debtors do not have to wait until there is a forced sale to calculate lien impairment or have a lien removed. Thus, the lien can be removed immediately, making a bankruptcy action unnecessary.

As you can see, it helps to understand how liens arise and what property is protected from the reach of your creditors by federal or state law.
Property that is “exempt” is untouchable in the eyes of the law should you find yourself in the undesirable position of having a creditor’s lien liquidating your assets.

 

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E-Recording documents can be tracked through the entire process. Documents are recorded the same day, if submitted during regular business hours. Once the document is accepted, you can immediately retrieve an image that includes the recorder’s stamp from eRecorderofdeeds.com.

Different Lien Types Provide Creditors with Different Rights
Creditors come in two basic types: secured and unsecured. Although the amount of the debt may be the same, the remedies available to the creditor are very different. Secured creditors have a claim against a specific asset, whereas unsecured creditors do not.
Creditors can be unsecured or secured. An unsecured, or general, creditor has a general claim against a debtor–this claim is not secured by any particular asset of the debtor. An unsecured creditor has the weakest claim, which may go unpaid in a bankruptcy proceeding. However, an unsecured creditor may become a secured creditor after a lawsuit and judgment. A secured creditor, who has an interest (referred to as a lien) on a particular asset, can use the court system to seize the asset and to satisfy the debt. This clearly presents a significant risk for the business owner.
Liens Enable Creditors to Assert Rights Over Property
Unless the debtor is prudent and has taken measures to safeguard his assets, there is a risk that the creditors can seize assets and take your wealth. In order to know if your assets are at risk, it is imperative that you have an understanding of the different types of liens you may encounter as a small business owner:
• Consensual
o Purchase-Money Security Liens
o Non-Purchase-Money Security Liens
• Statutory
o Mechanic’s Liens
o Tax Liens
• Judgment
Once we discuss the different types of liens, we’ll then examine how creditors might seek to get your assets through these types of liens, and what you can do, as an individual and as a small business owner, to maximize your protection against those creditors. The strategies outlined will address a broad spectrum of topics, from forms of property ownership to structuring debt to minimize exposure.
Consensual Liens Are Voluntary
As the name implies, consensual liens are those to which you voluntarily consent, as a result of a loan or other advance of credit. The property purchased secures the buyer’s obligation to pay for the property. One common example is the residential mortgage: a home buyer consents to a bank taking a security interest in the home when a mortgage is obtained. Similarly, a security interest also is created when a car dealer arranges for financing for a car buyer.
There are two broad classes of consensual liens:
• Purchase-Money Security Interest Liens. Here, the creditor extends credit to the debtor specifically for the purchase of the property that secures the debt. Examples include a first mortgage on a home, a car loan, and situations in which the seller finances the purchase of property, such as furniture, through a credit agreement.
• Non-Purchase-Money Security Interest Liens. Here, the debtor puts up property he or she already owns as collateral for a loan. The loan proceeds are then used to pay expenses (or perhaps to buy other property). Examples include a second mortgage (or refinancing of a mortgage) on a home or a loan used to pay operating expenses with previously owned office equipment put up as collateral.
Both types of consensual liens are usually non-possessory. This means that the creditor does not take or retain possession of the property; rather, the debtor takes, or retains, possession of the property. However, it’s possible for either type of consensual lien to be possessory. In that case, the creditor takes possession of the collateral. A loan from a pawnbroker, for example, usually would create a possessory, non-purchase-money security interest lien in the collateral.
While this seems very straightforward, the type of debt can have a large impact on the creditor’s rights if a debtor defaults. The rules vary from state to state, but characteristics of a debt are critical to understand if assets are to be protected. Issues include:
• Who is holding the property that secures the debt: the debtor or the creditor? In a car loan, the debtor has possession of the property. When a loan is obtained from a pawnshop, the creditor has possession of the property securing the loan.
• Was the debt incurred to purchase property or not? For example, a first mortgage loan is a purchase money loan since the proceeds were used to purchase a residence. In contrast, a refinancing loan is not a purchase money loan. The homeowner already owned the property.
• What is the nature of the property to which the lien is attached? This is often the essential inquiry when it comes to asset protection. The states, as well as the federal government, have a wide variety of laws relating to what assets are protected from creditors and how they are protected. The primary mechanism for protecting selected assets is a concept called exemptions. In essence, the law may declare that certain property simply cannot be seized by a creditor.
The other common types of liens are statutory liens and judgment liens.
Statutory and Judgment Liens Arise by Operation of Law
In addition to consensual liens, there are many different types of liens that creditors can use to get at your assets to satisfy a debt. In certain circumstances, creditors obtain security interests by the operation of state (or federal) laws. These liens include:
• Mechanic’s Liens. This type of lien arises when a contractor or mechanic performs work on property and is not paid. Examples include a contractor who installs a furnace in a home, or an auto mechanic who performs repairs to a car. This lien is a security interest in the property. If the owner tries to sell the property, the debtor will have a secured interest in the portion of the proceeds needed to pay the debt. In addition, having a mechanic’s lien can delay or prevent the sale of real property until debt is satisfied and the lien released.
• Tax Liens. This type of lien is placed against property by the local, state or federal government, as authorized by statute, for delinquent taxes, including property, income and estate taxes.
Judgment Liens Arise As a Result of a Lawsuit
Of the three types of liens (consensual, statutory and judgment,) the judgment lien is the most dangerous form, but one which the informed business owner may be able to eliminate. A judicial lien is created when a court grants a creditor an interest in the debtor’s property, after a court judgment.
Judgment liens can arise in a wide variety of circumstances–basically, any incident that can land you in court can end up generating a judgment lien. For example, if you are driving negligently and injure someone in an accident, the injured person may to sue for damages. To the extent that your insurance doesn’t cover the judgment, a judicial lien may be placed against the your property to secure payment of the claim to the injured party.
A plaintiff who obtains a monetary judgment is termed a “judgment creditor.” The defendant becomes a “judgment debtor.” The judgment in the lawsuit provides the basis for the lien. If the debt is not paid, the judgment creditor can then seek to enforce (or execute) the judgment. This can be accomplished by garnishing wages, seizing a bank account, or placing a lien against the debtor’s property. The lien is the first step by the judgment creditor in a process that will culminate in a sale of the attached property, to satisfy the judgment debt.
Any lien placed on the defendant’s assets as a result of a court judgment is known as a judgment lien. If a lien were placed on a home, the judgment creditor could then seek to foreclose on the property, in the same way a mortgage holder such as a bank could foreclose if it were not paid.
In this section, the term “judgment lien” is used in its strictest sense: a lien attributed to a court judgment, where the court judgment itself is the basis for the lien. An example would be a plaintiff who is awarded a monetary judgment against a defendant in a lawsuit based on negligence, and who then is granted an order of attachment against the debtor’s property.
In contrast, this definition excludes a judgment based on a pre-existing lien (i.e., a prior consensual lien or statutory lien). Thus, for example, this definition would exclude a judgment in a mortgage foreclosure. This distinction is critically important in discerning what types of liens against exempt property can be eliminated.
Battling Liens Against You
Asset protection requires that you understand how liens arise and what property is protected from the reach of your creditors by federal or state law. Many times, the fact that your assets are exempt from seizure makes a creditor reconsider filing a lawsuit against you.
is a good offense.” This definitely holds true for asset protection. In addition to shielding your assets when attacked, asset protection planning has another ancillary benefit that serves your goals: the more judgment-proof you make yourself, the less likely it will be that a creditor will bother to pursue a case against you., Or at the least, you may be able to influence a settlement, possibly sooner rather than later.
Avoiding Liens Through the Power of Persuasion
Many times, judicial liens can be avoided through the power of persuasion. That is, you may be able to avoid a lien by convincing the other party that any lawsuit would be a waste of time. The amount of time and money saved in avoiding litigation is substantial!
In a court proceeding, there are three parts to a lawsuit:
• factually proving the elements of the case (e.g., negligence),
• proving the existence and amount of monetary damages, and
• collecting the judgment.
The plaintiff has the burden in each of these three parts.
In many cases, the first part is not an issue. For example, if an employee making a delivery runs into the back of a vehicle stopped at a red light, there really is no issue as to whether the employee was negligent: The employee was negligent. However, the amount of monetary damages suffered will almost always be an issue, but the court will eventually determine the amount.
Of the three burdens the plaintiff carries, collecting a judgment can be the most difficult, particularly where there are no assets to attach–either because there are no significant assets, or all of the assets are protected by exemptions and other means.
Judgments expire. Most states provide that a judgment expires after 10 to 20 years. This may seem like a long time. However, judgment creditors rarely continue to pursue the collection of a judgment after an initial attempt fails when they realize that the effort will be fruitless.
In fact, the proceedings may stop far short of judgment. If someone with a claim learns that the other party has no reachable assets, usually the matter will be dropped, and no lawsuit initiated. Generally, few lawyers will take a case on a contingent fee basis for a plaintiff if it’s clear that the defendant doesn’t have any collectible assets (if they are “judgment proof.”) Thus, the plaintiff will be faced with the prospect of paying his or her attorney by the hour (at rates of $150 and upward per hour), with the likelihood that he or she will collect nothing. Faced with these dim prospects, even individuals who would otherwise sue on principle will usually choose not to pursue the matter further.
Informing the other party that the lawsuit will be fruitless, before it is filed, can be a very effective strategy. If you do not have resources that could be reached by a judgment creditor, let the other party know immediately of your situation. Because of the costs and time involved in bringing a lawsuit, most parties will forego the claim when presented with these facts.
Warning
A word of caution is necessary, however. Phrasing can be important. Don’t elaborate on the asset protection plan you have in place. General statements usually are better. Simply tell the other party, or his or her lawyer, that you will defend against the lawsuit if necessary, but that you don’t have any assets that would be available in any event.
When questioned, simply point out that your only real asset is your home (or your ERISA-qualified retirement plan), which is exempt. Tell the other party that you will vigorously defend against the lawsuit, but it will be a waste of time anyway. If you do not feel comfortable doing this, hire a lawyer. The fees spent will usually be worth the results achieved in this situation.

If you are not successful at discouraging a legal action, or if you are already facing liens against your property, it is important to examine whether those liens can be invalidated. If not, you need to consider whether they can be eliminated or reduced.
Lien Defects or FTC Rules Can Invalidate Liens
Your strategy for attacking a lien placed against your assets and your chances of success depend upon the type of lien that you are facing. If the lien was not properly created, you may be able to invalidate it. But, most likely, you will need to challenge it based on the fact the assets are exempt from lien.
Search for Defective Lien Creation or Perfection
When battling liens, a small business owner may be able to win by establishing that the lien is invalid. Liens that are invalid cannot impair any assets: it doesn’t matter whether those assets are exempt or nonexempt.
Statutory liens, such as mechanics’ liens and tax liens, are invalid unless they have been:
• filed with the appropriate government office (“perfected”), and then
• foreclosed on within a certain period of time.
The time limitations vary from state to state. In the case of mechanic’s liens, these periods are very short. Typically, these liens must be filed within 60 or 90 days after the work is performed, and then foreclosed on within one year. Tax liens usually have to be filed within 2 to 3 years, and expire after 10 or 15 years.
Even judgment liens have time limitations. Usually, judgment liens must be foreclosed on within 10 to 20 years. If any liens have not been filed, or foreclosed on, within the prescribed periods, the liens are invalid and unenforceable.
Example
Peter Jones has a contractor put a $40,000 addition on his residence, but has not yet paid the bill. Jones’ residence, worth $120,000 after the addition, is subject to a $100,000 first mortgage.
The residence is an exempt asset in Peter’s state under these facts. However, mechanics’ liens are valid, even when they impair an exempt asset.
Fortunately for Peter, the contractor failed to record his mechanic’s lien of $40,000 within 90 days of the job being completed, as required by state law.
Accordingly, the contractor’s lien is invalid and therefore of no consequence. Peter’s home is completely exempt from the claims of the contractor, based upon the mechanic’s lien statute. However, he could still be sued and ultimately subject to a judgment lien on his assets.

FTC Credit Practices Rule May Invalidate Lien
The Federal Trade Commission’s (FTC) Credit Practices Rule can be used to invalidate certain types of liens against household property. Remember, an invalid lien can be eliminated whether it is attached to exempt or nonexempt property.
Under the FTC Rule, certain non-purchase-money, non-possessory security interest liens are invalid: specifically, liens attached to household necessities and goods.
This provision affects only consumer goods and not liens on business property. Most importantly, because consumer goods often would be entitled only to limited protection as exempt assets, the rule can offer real protection.
Lien must be non-purchase-money lien. A non-purchase-money security interest lien arises where the proceeds from the debt were not used to purchase the property. In other words, this type of lien arises when you use property that you already own as collateral for a loan, the proceeds of which are used for some other purpose. Loans involving purchase-money security interest liens (where the creditor finances the purchase of the asset that is the collateral for the loan) are more common, and are not invalid under this rule.
Lien must be non-possessory. The lien must also be non-possessory to be invalid under the FTC Rule. This means that the debtor, as opposed to the creditor, has possession of the property. In contrast, an example of a possessory lien would be a pawn shop loan, where the creditor holds the collateral. Possessory liens in these types of property also remain valid under this rule.
Lien must be for household goods. The rule’s definition of household goods includes household necessities such as clothing, appliances and linens, and some items of little economic value but of unique, personal value to the owner. These may include items such as family photographs, personal papers, the family Bible, and household pets.
The following types of property are excluded from the definition of household goods:
• works of art,
• electronic entertainment equipment (except one television and one radio),
• items acquired as antiques (more than 100 years old),
• jewelry (except wedding rings),
• pianos or other musical instruments,
• boats,
• snowmobiles,
• bicycles, and
• cameras.
Liens on these types of property remain valid.
In practice, most commercial lenders and merchants will steer clear of liens that come under this rule because they are aware the liens would be invalid. However, some lenders who are either unscrupulous or ignorant of the rule may try to attach a lien to these assets. Therefore, you should be aware that liens that fall within the rule are invalid, and thus cannot impair any exempt or nonexempt assets.
Non-purchase-money, non-possessory liens on household items and certain other property can be eliminated in some bankruptcy proceedings as well.
Liens Can Not Attach to Exempt Assets
When battling liens against you, the ability to eliminate judgment liens by establishing that the assets are exempt can spell the difference between financial ruin and success.
Generally, a lien can be eliminated only if three conditions are met:
1. the lien is a type of lien that can be eliminated;
2. the lien is against a class of assets known as exempt; and
3. the amount of the lien impairs the exemption.
Determine the Type of Lien
The first task is to determine whether liens are the type that can be eliminated. This is determined under the law of your state or under federal bankruptcy law.
As a general rule, consensual liens and statutory liens cannot be eliminated, even when they are attached to protected assets. In contrast, when a creditor attempts to enforce a judgment lien against your protected property, in a state court or bankruptcy proceeding, that lien may be invalidated or eliminated. Alternatively, you may be able to bifurcate the lien, stripping away some of its value, in bankruptcy court.
Statutory and consensual liens can effectively nullify the idea of “exempt assets” granted under the law. The result is really no different than if the asset were not classified as exempt. Clearly, this understanding is important, as an examination of the asset exemption tables alone can lead to a conclusion that an asset is exempt and thus protected, when, in fact, it is fully subject to the claims of certain creditors.
Certain judgment liens cannot be eliminated. Although, most judgment liens cannot be enforced against exempt property, there are several exceptions to this rule. These exceptions generally apply across all the states and in bankruptcy proceedings.
Judgment liens arising in the following situations usually cannot be eliminated:
• alimony or child support
• an order of restitution based on a criminal case
• a judgment based on a prior consensual lien (e.g., a mortgage) or a prior statutory lien (e.g., a tax lien).
State lien exceptions are based on case law. It is surprising that most states do not expressly describe, by statute, the types of liens that can be eliminated in state court when the liens impair an exemption, as this is obviously such an important issue.
North Carolina is one of the few states that do provide clear-cut rules by statute. Other states, which typically do not have such express provisions, usually rely on court decisions, coupled with limited statutory provisions, to define the types of liens that can be eliminated. The general rules we’ve outlined above are usually good guidelines.
However, in a few states, the courts may have developed narrow exceptions to the general rules. For example, Alabama courts have ruled that a judicial lien arising from a tort judgment cannot be eliminated. While an exception such as this will be rare, you should still be aware that, due to the vagaries of the law in each state, exceptions may exist in a few instances.
Bankruptcy Law. Generally, the bankruptcy code follows the rules described above for eliminating liens that impair exempt assets. In addition, however, the code allows for the elimination of certain liens that impair exempt property that cannot be eliminated in a state court proceeding.
Warning
If you face any type of lien, don’t automatically assume it can or cannot be eliminated. Always consult an attorney. In rare instances, an exception may exist to the rules discussed above that will not allow lien elimination in your particular state.
On the other hand, sometimes an argument can be made that will allow lien elimination when it first appeared that this was not possible.

What State or Federal Exemptions Protect Assets?
If a piece of property is “exempt” it can not be seized by a creditor to pay off a debt you owe. Both federal and state governments allow debtors to keep certain items property, so that they are not left completely destitute by their creditors. Thus, you need to determine whether the asset is exempt from the reach of the judgment.
Whether you use your state’s exemptions or the federal exemptions to protect your assets depends upon your answer to these two questions:
• Are you in, or about to be in, bankruptcy?
• Does the state require that its exemptions be used, even if you are in bankruptcy?
If you are not in bankruptcy, you need to analyze your situation using your state’s asset exemption statutes. In a bankruptcy proceeding, compare the federal and state exemptions, unless the state has opted out of the federal exemptions.
State Exemptions Govern in Non-bankruptcy Cases
Each state provides its own exemptions. These exemptions are sometimes referred to as “post-judgment asset exemptions.” In a state court proceeding, after a judgment is rendered against you, you will have to rely on your own state’s exemptions.
Asset exemptions vary widely from state to state. Some states have developed reputations for writing laws that favor either debtors or creditors.
For example, Florida, Texas and Iowa have generous exemptions that favor debtors. These states provide debtors with, among other things, basically an unlimited homestead exemption. Thus, in these states, it is possible for a debtor to protect a fully owned home worth millions of dollars in either a state court proceeding or a bankruptcy proceeding. In contrast, Florida has a reputation of having laws that favor creditors. It provides a debtor with only a $15,000 homestead exemption. Florida has also opted out of the federal exemption system, so its residents don’t have the option of using the more generous federal exemptions in bankruptcy.
Warning
Changing your residence (e.g., from Florida to Texas) used to be an effective asset protection strategy because you used to only have to reside in a state for six months to claim that state’s protections.
However, the bankruptcy code was amended to provide a 730 day (two-year) waiting period. If you haven’t lived in the state for two years, then the laws of where you lived for the greater part of the six months prior to your move will apply. Needless to say, residence changes and asset conversions must be approached cautiously.

How Federal Exemptions May Govern in Bankruptcy
In a bankruptcy proceeding, certain assets are also exempt, and thus outside the reach of creditors. The federal bankruptcy law includes its own list of exemptions, which differ from the state lists. However, under the bankruptcy code, each state may allow its residents to choose between the federal bankruptcy asset exemptions and the state’s post-judgment asset exemptions, when a federal bankruptcy action is filed.
Alternatively, a state may “opt out” of the federal exemptions and give its residents only the right to use the state’s exemptions in a federal bankruptcy proceeding.
Example
John Smith forms an LLC to operate his business. Smith’s major supplier allows him to use an open account, but requires that he personally guarantee his LLC’s contract on the account.
After two years, John experiences serious financial difficulties and defaults on the open account. At that time, the balance on the account is $80,000. John’s LLC has no assets. His only personal asset is his residence, which has a value of $100,000 and a first mortgage with a balance of $40,000.
The supplier sues John personally based on his guarantee, receives a judgment of $80,000, and places a judgment lien on John’s residence in this amount.
However, John’s home state allows an asset exemption for a residence in the amount of $125,000. Thus, Smith’s residence is an exempt asset. The judgment lien cannot be enforced.

Calculating Asset Impairment to Avoid Liens
The final step in lien elimination is to calculate whether the amount of a lien actually impairs an exemption. If all of the liens encumbering the property are of a type that cannot be eliminated (e.g., consensual purchase-money security liens), there is no need to proceed with the calculation: None of the liens can be eliminated. However, once a determination is made that elimination can be done, the exact amount of the lien that can be eliminated must be calculated.
Calculation of the amount that a lien impairs an exemption becomes especially important in a bankruptcy proceeding, because there is a greater opportunity in that situation to eliminate non-purchase-money, non-possessory liens.
Liens that are dischargeable can be eliminated to the extent that they “impair” an exempt asset. The bankruptcy code provides that a lien shall be considered to impair an exemption to the extent that the sum of all the liens on the property, plus the amount of the exemption, exceeds the value of the property. As a rule, this formula also will be followed in state courts.
Another simpler way of looking at the calculation is this:
(value of property) minus (exemption amount) equals (amount of lien that cannot be eliminated)
When a particular item of property is subject to an unlimited exemption (e.g., an unlimited homestead exemption in Florida), all of the liens on the property can be eliminated (provided, of course, the liens are of a type that can be eliminated.) If the exemption is unlimited, the value of the property will equal the exemption. Thus, the formula will always yield a result of zero for the amount of the liens that cannot be eliminated.
Unfortunately, when there is a cap on the exemption amount, what appears to be a lien that can be eliminated will not be deemed to impair the exemption. Thus, an “exempt” asset may be lost.
Example
John Smith owns an item of property valued at $40,000. This property qualifies as household goods in a state that allows him a $20,000 exemption. There is a $10,000 judgment lien on the property
To determine if any of the lien can be eliminated, the amount of the exemption ($20,000) is subtracted from the value of the property ($40,000.) This leaves $20,000 in value to which a lien can attach.
None of the $10,000 can be eliminated.
If the lien was $30,000, and the property still had a value of $40,000, then $10,000 of these liens would be deemed to impair his exemption, and, thus, could be eliminated.

There can be variations among the states with respect to laws governing liens and calculation of the exemption impairment. In the last example, where the liens totaled $30,000, it may be possible in some states to eliminate the entire amount of the liens, on the grounds that elimination of liens is an all or nothing proposition: i.e., if there is any impairment of the exemption (here, impairment is calculated at $10,000), then the total amount of the liens is eliminated.
Example
John Smith personally owns an item of property that qualifies as a tool of the trade in a state that allows him to use his state’s exemption, which is $20,000. The value of the property is $40,000. Purchase-money liens on the property total $30,000. This type of lien cannot be eliminated in, or out of, a bankruptcy proceeding.
Smith suffers a judgment in the amount of $10,000 from a lawsuit for negligence. The judgment creditor places a lien on Smith’s tools of the trade. Judgment liens of this type can be eliminated. Further, the judgment lien impairs Smith’s exemption under the formula, and can be discharged.
The value of the property is $40,000, but only $20,000 is exempt. Thus, $20,000 in value can be encumbered by liens. In this case, the liens total $30,000. The purchase-money lien can not be eliminated, but the $10,000 judgment lien can be eliminated in its entirety.

In any case involving lien impairment of an exempt asset, it is wise to consult with an attorney before concluding how much of a lien can be eliminated in the particular state in question.
Work Smart
In some cases, encumbering an asset with a consensual lien may make a subsequent judgment lien dischargeable. This type of planning is discussed in our article on Effective Asset Exemption Planning

When and How Is Lien Impairment Calculated?
Most states calculate lien impairment only when there is an attempt at a forced sale of the property (i.e., foreclosure of the lien). In some states, however, the calculation may be done at the time the property is attached. In this situation, the judgment debtor may be able to have the lien removed in advance of any foreclosure proceeding. This would allow the owner to sell the property free of the judgment lien.
For the most part, judgment liens will represent the most significant example of liens that can be eliminated when they impair an exemption. But the fact that a judgment lien is usually valid for 10 to 20 years can have planning implications.
A crafty judgment creditor could attach a debtor’s home while the home was exempt, but wait to foreclose until the value of the home went up and the amount of the first mortgage went down, so that, according the formula used to calculate lien impairment, the judgment lien no longer impaired the exemption.
In that case, the best solution for the debtor may be a Chapter 7 bankruptcy proceeding. There, calculation is determined as of the date the proceeding is filed. This strategy eliminates the waiting game that some creditors may play.
Of course, in states such as Florida with an unlimited exemption for residences, this strategy would not be necessary, as the home will always remain immune from judicial liens, regardless of how long the judgment creditor waits.
Note, however, that the Chapter 7 filing also eliminates a related problem. If a judgment creditor places a lien on property (e.g., a home), the debtor will find it impossible to sell the property. Because liens run with the property, any buyer would take the property subject to the judgment lien. Thus, there would be no buyers. A bankruptcy proceeding terminates the judgment lien, which allows the owner to sell the property at a later date.
The following case study illustrates different results due to specific state laws.
Case Study
Sheila Wagner owns a residence worth $150,000 with a first mortgage of $100,000. Her home state exempts a residence in the amount of $125,000.
A judgment is rendered against Wagner in the amount of $80,000. At this time, the judgment creditor cannot foreclose on the property because the lien impairs the exemption, and could be eliminated: the value of the residence, $150,000, less the exemption, $125,000, equals the amount of liens that cannot be eliminated, $25,000. Already, the first mortgage exceeds this amount. Thus, the judicial lien can be eliminated in its entirety.
Now let’s say that 10 years later the home is worth $250,000 and the first mortgage totals $30,000. The results are different: the value of the residence, $250,000, less the exemption, $125,000, equals the amount of liens that cannot be eliminated, $125,000. The first mortgage totals only $30,000. Thus, another $95,000 of liens cannot be eliminated ($125,000 less $30,000). This means that no part of the judicial lien can be eliminated, and Wagner will lose her home to foreclosure.
In this situation, Wagner should have considered filing a Chapter 7 bankruptcy proceeding 10 years earlier, when the entire judicial lien could have been eliminated.
Now let’s say that Wagner is a Florida resident. Florida has an unlimited exemption for a residence.
Due to the unlimited exemption, the home will always be exempt. A waiting strategy by a judgment creditor would be ineffective. The value of the home, and the value of the exemption, will always be equal. As a result, the calculation will always result in the full value of the judicial lien being subject to elimination.
In this situation, Wagner would only need to consider a bankruptcy filing if she were interested in selling the home, and she were unable to have the lien removed before a forced sale of the property by the judgment creditor. However, luckily for her, Florida is one of the states that provide that creditors cannot attach an exempt asset. Judgment debtors do not have to wait until there is a forced sale to calculate lien impairment or have a lien removed. Thus, the lien can be removed immediately, making a bankruptcy action unnecessary.

As you can see, it helps to understand how liens arise and what property is protected from the reach of your creditors by federal or state law.
Property that is “exempt” is untouchable in the eyes of the law should you find yourself in the undesirable position of having a creditor’s lien liquidating your assets.

 

Official Records

OFFICIAL RECORDS
The Recording Division is located at the northwest corner of the main floor of the Gadsden County Courthouse – Room 102. The official records are open to the public and can be accessed from microfilm and computer terminals located in the vault adjacent to the recording office.
850-875-8601 ext. 7026, 7027, 7028. e-mail: recording@gadsdenclerk.com
Recording, indexing and filing any instrument not larger than 14″ x 8 1/2″ :
First page $10.00
Each additional page or fraction thereof $8.50
Indexing instruments recorded in the Official Records which contain more than four names – cost per additional name $1.00
Examining, certifying and recording plats and condominium drawings:
First page $30.00
Each additional page $15.00
Documentary Stamps:
Deeds: Per $100 of the consideration $0.70
Mortgages: Per $100 of the consideration $0.35

 

The Recording Division of Clerk of the Circuit Court office is responsible for recording warranty deeds, mortgages, and other instruments related to real property in Gadsden County. Documents may be recorded in person or mailed to the Clerk of the Circuit Court. The Recording Division is located in the northwest corner of the main floor of the Gadsden County Courthouse, room 102. The Circuit Court Clerk will accept any document authorized by Florida law to be recorded, provided it is in the proper format, is photographically reproducible, contains required information, and proper fees and taxes have been paid.

Recording Act: No conveyance, transfer, or mortgage of real property, or of any interest therein, nor any lease for a term of 1 year or longer, shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice, unless the same be recorded according to law; nor shall any such instrument made or executed by virtue of any power of attorney be good or effectual in law or in equity against creditors or subsequent purchasers for a valuable consideration and without notice unless the power of attorney be recorded before the accruing of the right of such creditor or subsequent purchaser.

Grantees by quitclaim, heretofore or hereafter made, shall be deemed and held to be bona fide purchasers without notice within the meaning of the recording acts.

RECORDING REQUIREMENTS

• Documents will be scanned or microfilmed and thus need to be clear and legible. Photographic clarity will be best achieved if white paper (size 8.5×11 inches or 8.5×14 inches) and black ink are used. A font size of 12 point can be used to ensure legible photographic reproduction. Typewritten documents are consistently more legible and clearly reproducible than handwritten documents.

• All pages of the same document can be stapled together, as it can be difficult to tell whether certain documents are intended to be recorded on their own or as riders or attachments to other documents. If multiple documents are submitted, do not staple them together if they are to be recorded separately.

• At the top of the first page, provide a blank 3×3 inch space in the top right corner. Subsequent pages should have a blank 1×3 inch space in the top right corner. These spaces are reserved for use by the clerk of court. All other margins should be at least 1 inch.

• The name and address of the actual person who prepared the document or under whose supervision it was prepared should be legibly printed, typed, or stamped on the instrument in the following format: “PREPARED BY: name and address.” This should be in the top left corner of the first page.

• The title of the document should be given after the preparer’s information, centered on the first page.

• After the title, provide the Property Appraiser’s Parcel Identification number.

• The mailing address of each person executing the instrument should be printed, stamped, or typed on the instrument.

• The grantor’s signature must be acknowledged by two witnesses.

• Provide the mailing address of the grantee (this is the second party) on any instrument other than a mortgage conveying any interest in real property. This needs to be legibly printed, typed, or stamped on the first page.

• Corresponding names need to be printed, typed, or stamped under signatures of each person executing the instrument, witnesses to the instrument, and the notary public or other person authorized to take acknowledgments.

• The notary acknowledgment must be complete and should include the names of persons appearing before the notary, date of acknowledgment, notary’s seal, and notary’s signature.

• All names are indexed, except persons executing as Attorney in Fact under a Power of Attorney. If the same name appears as grantor and grantee, it will be counted twice.

• If special services are requested or if there are unusual circumstances affecting fees or taxes due, clear instructions should be provided. If taxes are not due or have been paid on another document, indicate this on the face of the new document: “Documentary Stamp Tax paid on document recorded under ______________ or Book ________ and Page no. ______.” For exempt documents: “In accordance with (Exemption Number), taxes are not due on this recording.” This information will not only assist in recording, but may also prevent penalties and interest from being levied by the Department of Revenue.

A DR-219 form is no longer needed to record a deed. However, either of the following needs to be included on the deed: the sale/transfer price or amount of documentary stamp tax.

RECORDING COSTS

To record, index, and file any instrument not larger than 8.5×14 inches, the fee is $10 for the first page and $8.50 for each additional page. Instruments larger than 8.5×14 inches will have an additional charge of $8.50 for each additional 8.5×14 inch portion.

Indexing instruments in the Official Records which contain more than four names will cost $1 per each additional name.

Documentary stamps for deeds are $0.75 per $100 of the consideration.

Documentary stamps for mortgages are $0.35 per $100 of the consideration.

Certifying copies in the public record is $2 per document.

An overpayment that exceeds $5 will be refunded to the person who made the payment. If the amount of overpayment is $5 or less, no refund will be given.
A self-addressed stamped envelope is not required, but it is helpful for the return of documents.

Recording Fees
The Recording Division of Clerk of the Circuit Court office is responsible for recording warranty deeds, mortgages, and other instruments related to real property in Gadsden County. Documents may be recorded in person or mailed to the Clerk of the Circuit Court. The Recording Division is located in the northwest corner of the main floor of the Gadsden County Courthouse, room 102. The Circuit Court Clerk will accept any document authorized by Florida law to be recorded, provided it is in the proper format, is photographically reproducible, contains required information, and proper fees and taxes have been paid.Recording Act: No conveyance, transfer, or mortgage of real property, or of any interest therein, nor any lease for a term of 1 year or longer, shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice, unless the same be recorded according to law; nor shall any such instrument made or executed by virtue of any power of attorney be good or effectual in law or in equity against creditors or subsequent purchasers for a valuable consideration and without notice unless the power of attorney be recorded before the accruing of the right of such creditor or subsequent purchaser.Grantees by quitclaim, heretofore or hereafter made, shall be deemed and held to be bona fide purchasers without notice within the meaning of the recording acts.RECORDING REQUIREMENTS• Documents will be scanned or microfilmed and thus need to be clear and legible. Photographic clarity will be best achieved if white paper (size 8.5×11 inches or 8.5×14 inches) and black ink are used. A font size of 12 point can be used to ensure legible photographic reproduction. Typewritten documents are consistently more legible and clearly reproducible than handwritten documents.• All pages of the same document can be stapled together, as it can be difficult to tell whether certain documents are intended to be recorded on their own or as riders or attachments to other documents. If multiple documents are submitted, do not staple them together if they are to be recorded separately.• At the top of the first page, provide a blank 3×3 inch space in the top right corner. Subsequent pages should have a blank 1×3 inch space in the top right corner. These spaces are reserved for use by the clerk of court. All other margins should be at least 1 inch.• The name and address of the actual person who prepared the document or under whose supervision it was prepared should be legibly printed, typed, or stamped on the instrument in the following format: “PREPARED BY: name and address.” This should be in the top left corner of the first page.• The title of the document should be given after the preparer’s information, centered on the first page.• After the title, provide the Property Appraiser’s Parcel Identification number.• The mailing address of each person executing the instrument should be printed, stamped, or typed on the instrument.• The grantor’s signature must be acknowledged by two witnesses.• Provide the mailing address of the grantee (this is the second party) on any instrument other than a mortgage conveying any interest in real property. This needs to be legibly printed, typed, or stamped on the first page.• Corresponding names need to be printed, typed, or stamped under signatures of each person executing the instrument, witnesses to the instrument, and the notary public or other person authorized to take acknowledgments.• The notary acknowledgment must be complete and should include the names of persons appearing before the notary, date of acknowledgment, notary’s seal, and notary’s signature.• All names are indexed, except persons executing as Attorney in Fact under a Power of Attorney. If the same name appears as grantor and grantee, it will be counted twice.• If special services are requested or if there are unusual circumstances affecting fees or taxes due, clear instructions should be provided. If taxes are not due or have been paid on another document, indicate this on the face of the new document: “Documentary Stamp Tax paid on document recorded under ______________ or Book ________ and Page no. ______.” For exempt documents: “In accordance with (Exemption Number), taxes are not due on this recording.” This information will not only assist in recording, but may also prevent penalties and interest from being levied by the Department of Revenue.A DR-219 form is no longer needed to record a deed. However, either of the following needs to be included on the deed: the sale/transfer price or amount of documentary stamp tax.

RECORDING COSTS

To record, index, and file any instrument not larger than 8.5×14 inches, the fee is $10 for the first page and $8.50 for each additional page. Instruments larger than 8.5×14 inches will have an additional charge of $8.50 for each additional 8.5×14 inch portion.

Indexing instruments in the Official Records which contain more than four names will cost $1 per each additional name.

Documentary stamps for deeds are $0.75 per $100 of the consideration.

Documentary stamps for mortgages are $0.35 per $100 of the consideration.

Certifying copies in the public record is $2 per document.

An overpayment that exceeds $5 will be refunded to the person who made the payment. If the amount of overpayment is $5 or less, no refund will be given.
A self-addressed stamped envelope is not required, but it is helpful for the return of documents.

Cities and towns

Recording Liens | Online Here! | Fees | Gadsden Comptroller | FL.

Now you can record Liens, Releases, and other types of documents Online, in just minutes! Save yourself time and the trip to county offices.

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Cities and towns

City of Chattahoochee
Town of Greensboro
City of Gretna
Town of Havana
City of Midway
City of River Junction
City of Quincy
History

Gadsden County was created in 1823. It was named for James Gadsden of South Carolina, who served as Andrew Jackson’s aide-de-camp in Florida in 1818. Gadsden County is historically known for its tobacco crop which is obsolete today.
Geography

According to the 2000 census, the county has a total area of 528.49 square miles (1,368.8 km2), of which 516.13 square miles (1,336.8 km2) (or 97.66%) is land and 12.35 square miles (32.0 km2) (or 2.34%) is water.[2]

Gadsden County is part of the Tallahassee Metropolitan Statistical Area. Gadsden County is in the Eastern Time Zone. Its western border with Jackson County forms the boundary in this area between the Eastern and Central Time Zones.

 

  • History

    Gadsden County was founded in 1821 when Florida was ceded to the United States under the Adams–Onís Treaty, which was negotiated with Spain by Secretary of State John Quincy Adams. Created on the same date, Gadsden and Escambia counties were Florida’s two original counties. Forty four counties were created from Gadsden county directly or indirectly. They include Duval (1822), Monroe (1823), Alachua, Nassau, and Orange (1824), Columbia (1832), Hillsborough (created from Alachua and Monroe) (1834), Miami-Dade (1836), Hernando (created from Hillsborough, Mosquito(became Orange), and Alachua) (1843), Marion (created from Alachua and Orange) (1844), Levy (created from Alachua) (1844), Putnam (created from Alachua and Gadsden) (1849), Sumter, Volusia and Brevard (created from Orange) (1853-55), Manatee (created from Hillsborough and Orange) (1855), Bradford (created from Columbia and Alachua) (1858), Clay (created from Duval) (1858), Suwannee (created from Columbia) (1858), Baker (created from Bradford) (1861), Polk (created from Brevard and Hillsborough) (1861), Citrus (created from Hernando) (1867), DeSoto (created from Manatee) (1887), Lake (created from Orange and Sumter) (1887), Lee (created from Monroe) (1887), Osceola (created from Brevard and Orange) (1887), Pasco (created from Hernando) (1887), St. Lucie (created from Brevard) (1905), Palm Beach (created from Miami-Dade) (1909), Pinellas (created from Hillsborough) (1912), Seminole (created from Orange) (1913), Broward (created from Miami-Dade) (1915), Flagler (created from Gadsden and Volusia) (1917), Okeechobee (created from Osceola and Brevard) (1917), Charlotte (created from DeSoto) (1921), Glades, Hardee, and Highlands (all created from DeSoto) (1921), Sarasota (created from Manatee) (1921), Union (created from Bradford) (1921), Collier and Hendry (created from Lee) (1923), Gilchrist (created from Alachua) (1925), Indian River (created from St. Lucie) (1925) and Martin (created from St. Lucie and Palm Beach) (1925).

 

 

Zip codes for Gadsden County-Florida

32324 Chattahoochee 850 Gadsden County Florida (FL)
32330 Greensboro 850 Gadsden County Florida (FL)
32332 Gretna 850 Gadsden County Florida (FL)
32333 Havana 850 Gadsden County Florida (FL)
32343 Midway 850 Gadsden County Florida (FL)
32352 Mount Pleasant 850 Gadsden County Florida (FL)
32351 Quincy 850 Gadsden County Florida (FL)
32352 Quincy 850 Gadsden County Florida (FL)
32353 Quincy 850 Gadsden County Florida (FL)