Of the three types of liens, this 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.
These can arise in a wide variety of circumstances. For example, if a driver negligently injures someone in an accident, the injured person is likely to sue for damages. To the extent that insurance doesn't cover the judgment, a judicial lien may be placed against the negligent driver's 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 would then seek to foreclose on the property, in the same way a mortgage holder such as a bank would 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.