All over California, businesses large and small are being hit with false and fraudulent UCC liens placed against their assets. These deceptive liens are falsely claiming that these businesses owe a non-existent debt to the person or business who filed the lien. Behind many of them are disgruntled people, often of the sovereign citizen variety. They file a fake UCC 1 financing statement and a fake JL 1 notice of judgment lien. The filings show up on the CA Secretary of State’s public UCC database. It’s a really bizarre process that occurs outside of the judicial system. Every state has a UCC office, usually the Secretary of State, but what follows applies to California only.
A UCC 1 is public notice that a creditor has a security interest in the debtor’s property (inventory, equipment, receivables). It usually arises from a secured transaction, e.g. a loan to a car dealership secured by its car inventory. The creditor files a UCC 1 to perfect its interest and set priority if there’s a default or bankruptcy. California law states that a person can only file a UCC 1 financing statement if the debtor authorized the filing (Cal. Com. Code 9509). The authorization isn’t on the UCC 1 form but is often in the parties’ written agreement.
In California, as opposed to other states, a judgment creditor can file a Notice of Judgment Lien, a JL 1, on the UCC database. This is not a consensual lien like a UCC 1. It is an enforcement tool telling the public that the creditor won a lawsuit and has a court-signed judgment against the debtor.
The harm caused by an erroneously recorded notice can be quite severe. A fake UCC 1 can hurt you when you try to get credit: it signals to potential lenders that you have already pledged your assets as collateral, or that you do ‘questionable secured deals.’ A fake JL 1 also falsely suggests that you lost a lawsuit to the ‘creditor.’
So how does a fake one get onto the database at all? The Secretary of State’s UCC office is strictly ministerial. This means they check filings for completeness, but do not verify that the debtor authorized the filing of the UCC 1 (nor that a judgment really exists). So in theory, anyone can file against anyone. A filing that was made in error (or maliciously) has no legal effect, but it still shows on the database and tells the public you owe the ‘creditor’.
Two real cases show how far this goes. One small business discovered that a former customer had filed a JL 1 with a supposed 9 million dollar judgment against it. The other was a business that had loaned money to a customer. Then the customer filed a UCC 1, falsely claiming that the business owed it that amount, and that it had a lien on the business’s inventory. Complaining to the office does not fix it. The SOS insists it will not remove a UCC 1 or JL 1, even if it was filed with no legal authority to do so, unless it has an order or judgment from a California court to do so.
Reason with the Person Who Filed
The first resort is self-help: you have to try to reason with the person who filed the UCC 1 or JL 1 and get them to remove it.
One option you might consider is filing a UCC 3 financing statement amendment. It has fields the ‘debtor’ can use to terminate the UCC 1. However, it doesn’t remove the UCC 1 from the database, it just posts it as a new document in the UCC 1’s file dropdown. It is still there for the public to see and for them to judge for themselves if it was a wrongful filing. Your business is still listed as a ‘debtor’ in the search.
You can also file a UCC 5 information statement. It’s got fields to say the UCC 1 is inaccurate, was wrongfully filed, or was filed by someone not entitled to. There’s also a blank field you can fill with detailed reasons. Unfortunately, like a UCC 3, it doesn’t get the UCC 1 or your name out of the database.
Sue the “Creditor”
A JL 1 is a different animal. It is up only to the judgment creditor or its authorized representative to remove it, so aside from reasoning with the person, you have no choice but legal action. Self-help is a band-aid: there is no court-ordered expungement, no recovery of damages. An effective option is to sue the “creditor”.
That raises the question of who should handle it. Our business debt settlement company, Delancey Street, is not a law firm. When we see that litigation is the right move, we refer our clients to a vetted independent attorney, where the attorney-client relationship is between the business owner and that lawyer.
When a public document falsely says your business owes a ‘creditor,’ it is by definition defamatory, so you can sue for defamation per se and trade libel. But the wrongful use of a legal procedure such as the SOS is also actionable as an abuse of process. The most important claim, however, is violation of Cal. Code Civ. Proc. 765.010, which prohibits filing a lien or other encumbrance knowing it is false, with intent to harass.
A violation of section 765.010 opens the door to expungement of the filing, a civil penalty of 5,000 dollars (765.040), and recovery of costs and attorneys’ fees spent removing the filing (765.030). A lawsuit may take time and resources, but it can be the most effective way to get the filing expunged entirely and compensate the business.
No one wants a lien sitting on the record, and the California Legislature finally got around to noticing that fact. AB 501 would increase the 765.040 penalty from $5,000 to $15,000, and allow the debtor to recover three times the court fees paid to expunge the lien under the Commercial Code. As of January 15, 2026, the bill was still pending in the Appropriations Committee.
We Negotiate with the Funders and Lenders
A fake filing can be a problem, but it may not be the only one an owner under pressure is facing. If it’s MCA advances, SBA loans or lines of credit crushing your business, we negotiate with the funders and lenders for less than the full balance. We don’t sell another loan. Our first consultation is free and confidential.
