Restitution vs Mortgage

B

bordercollie

New Member
Jurisdiction
California
Hello,

About 10 years ago I was convicted of vandalizing a duplex willed to my mom but "expropriated" by my uncle by way of joint tenancy deed. I was ordered to make restitution for about $95,000. After completing a 8 month jail sentence the nice doctors in the jail (LA County) helped me get on SSI (the court has refused to budge on restitution so work seems pointless).

I have been off probation for about 5 years but the judgement is still there (I never paid any of it and have always fought my case). I recently purchased a farm house in Iowa (the house is fully mortgaged) but what would happen if someone tried to collect on the judgement? Would someone still be able to foreclose on my property even with a mortgage?
 
bordercollie said:
But I don't think a homestead exemption will protect against a "criminal" judgement. I'm hoping that as long as I keep my house mortgaged I'm safe?
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Keeping your house mortgaged won't do anything other than decrease the equity you have in it. If the homestead exemption doesn't protect, it is unlikely that anything else will.

What you need to be concerned about is that the person who has the judgment against you - your uncle, I presume - will try to enforce it, and will file a judgment lien against your property in Iowa. I don't know Iowa civil procedure, but they could probably then take steps to have the property sold and the proceeds used to pay out their judgment. The judgment lien would rank behind the mortgage in priority, so the mortgage would get paid out first, then the judgment. So if it sells for $150,000, and you've got a $100,000 mortgage, the mortgage would get paid out first; then $50,000 would go to pay the judgment lien; and you'd still owe $35,000 on the judgment. And you'd have no house.

If the house is fully mortgaged, i.e. there is no equity in it whatsoever, then it's probably not worth their effort to file a judgment against it and foreclose. I'm not sure I'd consider that "protection", it's just simple economics.
 
dee_dub said:
Keeping your house mortgaged won't do anything other than decrease the equity you have in it. If the homestead exemption doesn't protect, it is unlikely that anything else will.

What you need to be concerned about is that the person who has the judgment against you - your uncle, I presume - will try to enforce it, and will file a judgment lien against your property in Iowa. I don't know Iowa civil procedure, but they could probably then take steps to have the property sold and the proceeds used to pay out their judgment. The judgment lien would rank behind the mortgage in priority, so the mortgage would get paid out first, then the judgment. So if it sells for $150,000, and you've got a $100,000 mortgage, the mortgage would get paid out first; then $50,000 would go to pay the judgment lien; and you'd still owe $35,000 on the judgment. And you'd have no house.

If the house is fully mortgaged, i.e. there is no equity in it whatsoever, then it's probably not worth their effort to file a judgment against it and foreclose. I'm not sure I'd consider that "protection", it's just simple economics.
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Thanks for the reply. The additional piece of info is my mom holds the mortgage (she loaned me the money to purchase the property). From my understanding homestead exemptions will not work with criminal restitution so I just want to be prepared if a lien pops up

Also, my uncle was compensated $95,000 through our insurance company (in the last 10 years I have not heard from them at all).

But lets say my house is worth approx. $100,000 and there is a $100,000 mortgage, could the court permit a lien holder to foreclose? I guess I could always get a 2nd mortgage on the house as "insurance" but what would be the best thing to do with this?
 
bordercollie said:
Thanks for the reply. The additional piece of info is my mom holds the mortgage (she loaned me the money to purchase the property). From my understanding homestead exemptions will not work with criminal restitution so I just want to be prepared if a lien pops up

Also, my uncle was compensated $95,000 through our insurance company (in the last 10 years I have not heard from them at all).

But lets say my house is worth approx. $100,000 and there is a $100,000 mortgage, could the court permit a lien holder to foreclose? I guess I could always get a 2nd mortgage on the house as "insurance" but what would be the best thing to do with this?
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If your mother owns the home and holds the note on your mortgage, any lien placed against the home can't operate against your mother's interests.

If you want to solidly protect your right to live in the home, you and mother should discuss her gifting you a "life estate" in the home with a local real estate or trusts and estates attorney.

You might also ask about creating a family trust and placing the home under the trust's protection.
 
bordercollie said:
But lets say my house is worth approx. $100,000 and there is a $100,000 mortgage, could the court permit a lien holder to foreclose? I guess I could always get a 2nd mortgage on the house as "insurance" but what would be the best thing to do with this?
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Contrary to army judge, I'm working on the assumption that YOU are the registered owner of the property, not your mom.

Yes, they could permit a lien holder to foreclose. Technically they are not "foreclosing", because they are not a mortgagor. They are executing on their judgment by obtaining an order for the sale of your property. The court is not there to assist debtors in thumbing their nose at creditors, and if a creditor wants to try to sell the property (even if it may wind up not benefiting them, because the proceeds will at most pay out the mortgage) a court (IMHO) won't stand in their way. I doubt that a creditor *would* do this - because there is nothing in it for them - but theoretically it's possible.

Getting a second mortgage isn't "insurance". It just puts you further in the hole.
 
dee_dub said:
Contrary to army judge, I'm working on the assumption that YOU are the registered owner of the property, not your mom.

Yes, they could permit a lien holder to foreclose. Technically they are not "foreclosing", because they are not a mortgagor. They are executing on their judgment by obtaining an order for the sale of your property. The court is not there to assist debtors in thumbing their nose at creditors, and if a creditor wants to try to sell the property (even if it may wind up not benefiting them, because the proceeds will at most pay out the mortgage) a court (IMHO) won't stand in their way. I doubt that a creditor *would* do this - because there is nothing in it for them - but theoretically it's possible.

Getting a second mortgage isn't "insurance". It just puts you further in the hole.
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And if the judgement holder did foreclose on my property (how is it not foreclosure?) wouldn't the mortgage holder (in this case my mom) be able to bid on the property up to the value of the mortgage without spending additional cash?

I'm thinking a trust may be the best way to go but at the moment I'm installing a new septic system and unless you are a licensed plumber only the homeowner can do the work

What should I expect to pay to have the home placed in a trust at some point? Can the trust be in my name? (my mom is getting older).
 
bordercollie said:
And if the judgement holder did foreclose on my property (how is it not foreclosure?) wouldn't the mortgage holder (in this case my mom) be able to bid on the property up to the value of the mortgage without spending additional cash?

I'm thinking a trust may be the best way to go but at the moment I'm installing a new septic system and unless you are a licensed plumber only the homeowner can do the work

What should I expect to pay to have the home placed in a trust at some point? Can the trust be in my name? (my mom is getting older).
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A life estate for your use is so much easier.
I've got some of my properties in life estates with the remainder reverting to a family trust, others reverting ownership to various heirs.


You can't create the trust.
Remember, you don't want to own anything.
Mom can probably create a trust with the help of a lawyer for about $2, 000 to $3,500, maybe less if you bargain.

California lawyers aren't that cheap.

Or, she can try to create her own, with your help by using forms from this site, plus court and fling fees, around $300 to $500:

Living Trust - Create Living Trust Forms Online | LegalZoom


This California lawyer reveals more:

Family Limited Partnerships: Control and Protection | Lodmell & Lodmell
 
bordercollie said:
And if the judgement holder did foreclose on my property (how is it not foreclosure?) wouldn't the mortgage holder (in this case my mom) be able to bid on the property up to the value of the mortgage without spending additional cash?

I'm thinking a trust may be the best way to go but at the moment I'm installing a new septic system and unless you are a licensed plumber only the homeowner can do the work

What should I expect to pay to have the home placed in a trust at some point? Can the trust be in my name? (my mom is getting older).
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Regarding trusts et al, what army judge said.

Regarding foreclosure - it's not a foreclosure by the judgment creditor because they don't have a *mortgage* over the property. One can only foreclose on a mortgage. The judgment creditor could register their judgment against the property and get a judgment lien, and use that to get an order forcing the sale. Same outcome - you're out and the property gets sold - but technically not a foreclosure.
 

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