There’s a common misconception in the lending industry that judicial foreclosures take “too long” and are “too costly.” While it’s true that some non-court-based options may move faster, court-supervised remedies offer powerful legal advantages that can make the difference between partial recovery and full repayment.
These remedies aren’t just about recovering the property; they’re about enforcing your full legal rights against the borrower and any guarantors.
What Does a Judicial Foreclosure Process Involve?
In this approach, a lender files a civil lawsuit against the delinquent borrower to obtain a formal judgment. This judgment can include not only the right to foreclose on the property, but also a monetary award for the deficiency balance, the amount still owed after a sale.
That judgment becomes a key asset. It gives the lender legal leverage and opens the door to an entire arsenal of collection options beyond the property itself.
The Strategic Benefits of Securing a Judgment
When structured and executed correctly, court-supervised options give lenders more control and flexibility. Here’s why they’re a strong option for savvy lenders:
- Extended Lifespan of Recovery Rights: Judgments are enforceable for 10 years in California and can be renewed for an additional five, giving lenders ample time to pursue repayment through multiple channels.
- Personal Liability for Borrowers and Guarantors: If the property doesn’t cover the full loan balance, the lender still has a path to collect the rest from the borrower or guarantor personally, something non-court processes do not allow.
- Strategic Leverage: Even the threat of enforced judgment remedies can incentivize borrowers to negotiate and settle faster.
- Additional Repayment Tools: In California, lenders can tap into post-judgment remedies such as liens, wage garnishments, and bank levies. These tools aren’t available in non-court foreclosure scenarios.
Enforcement Options After a Judgment
Once you secure a judgment, you can go beyond the property and pursue broader asset recovery, including:
- Recording Abstracts of Judgment: This creates a lien on any real estate the borrower owns in the county where it’s filed. It also publicly signals that the borrower has outstanding debt, impacting their ability to sell or refinance property.
- Wage Garnishment and Bank Levies: If the borrower is employed or holds funds in a bank account, the sheriff can garnish wages or seize funds to satisfy the debt.
- Judgment Debtor Examinations (JDXs): The borrower is compelled to appear in court and disclose financial details under oath, including tax returns, bank statements, and property deeds. If they fail to appear, a bench warrant can be issued.
These remedies create real pressure and often result in faster, more complete repayment.
Why Nonjudicial Foreclosures Aren’t Always “Easier”
Though non-court-based based options are generally more popular, they have shortcomings:
- No Personal Liability: Lenders are limited to recovering only what the property brings at auction. If the asset is underwater, the loss falls squarely on the lender.
- Third-Party Delays: The process is subject to delays by third-party trustees, who may be backlogged for months.
- One-Shot Recovery: You only recover what the property sells for, nothing more. If there’s no equity, you get stuck holding the property subject to superior liens.
And perhaps the biggest misconception: that nonjudicial foreclosure is always faster. In truth, court backlogs are often shorter than trustee delays.
Determining What’s Right For You
When a borrower defaults, you deserve every legal advantage available. Court-supervised enforcement gives lenders the flexibility, longevity, and authority to recover what they’re owed, not just from the property, but from the people behind the default.
Contact our Litigation & Bankruptcy team today to find out how we can help you determine the best path forward and recover what you’re owed. Efficiently, effectively, and with confidence.
