Submitted by UCS on February 20, 2020
In part one of our series, we discussed how you should conduct and what to look for when performing UCC searches. Another very important item on your checklist should answer the following question: Are there any judgments or more importantly any pending civil suits that the debtor is involved in? Any type of litigation is potentially harmful to a business and a lender should know all the risks before making a final decision to lend funds.
Hopefully you can answer this question by performing a litigation search.
What is a litigation search?
A litigation search is a public records search of various federal, state and county courts that will cover judgement of a court case and open/pending lawsuits involving the plaintiff (debtor).
Where are litigation searches performed?
Litigation searches are performed at the following courts:
Keep in mind that within each court system, there are different courts assigned the authority or jurisdiction to process various kinds of civil matters.
What type of information should I expect from a litigation search?
This search reflects only unreleased Judgment Liens filed within the past 10 years and currently reflected in the specified index. Defendant Only.
This search reflects only monetary judgments not reflected as satisfied within the civil court index. It covers a 10-year search period. Defendant Only.
Searches for civil cases reflecting subject as defendant within the specified index. It covers a 10-year search period. Need to include copy of docket/complaint.
Ultimately, it is the lender’s responsibility to investigate and analyze whether the borrower’s ability to repay or honor the agreement they enter. Conducting a through and comprehensive due diligence search offers the lender the ability to make an informed decision.
Note: When conducting due diligence searches, information can be complex and overwhelming. Consider speaking with an attorney to determine what information you need and how it will affect your decisions. United Corporate Services, Inc. does not offer legal or tax advice.
About the author
Jason Erb is the UCC Division Manager for United Corporate Services, Inc. and has extensive knowledge of the Uniform Commercial Code. If you have a question, feel free to email Jason at Jason.firstname.lastname@example.org or call (800) 899-8648 Ext. 127.