How to Remove a UCC Lien From Your Business

You look up the California Secretary of State’s UCC database and see your company as a “debtor” with someone you never borrowed from in your life. Across California, unhappy people, often of the “sovereign citizen” type, are filing phony UCC 1’s (and JL 1’s) against small businesses, big businesses, and everything in between. Sounds crazy, right? Well, it’s actually happening. Fortunately, California law gives some ways to undo this situation. They’re not perfect, but they’ll help in a pinch.

Some background first. UCC is the acronym for Uniform Commercial Code, a set of rules that governs commercial transactions in the United States. Each state has a UCC office, which is usually the Secretary of State. Everything here is limited to California. A financing statement is a legal document used to notify the public that a creditor has an interest in the property of the debtor. It is used to provide notice of a creditor’s claim on a debtor’s property, such as inventory, equipment, and accounts receivable. That interest typically comes from a secured transaction, like a loan to a car dealership, say, secured by the car dealership’s inventory. Creditors file to perfect their interest and establish a public priority in case of default or bankruptcy.

Under California law, the debtor has to expressly authorize the creditor to file a UCC 1 (Cal. Com. Code § 9509). That authorization isn’t on the UCC 1 itself. It’s often in the underlying written agreement. A JL 1 is a notice of judgment lien. The California Secretary of State allows it, but most other states do not. It is a non-consensual document. It notifies the public that a creditor won a lawsuit and received a court-signed judgment.

A wrongful filing of either kind can cause real harm. For example, if a prospective lender is doing due diligence on your company and sees the filing, it might think there’s some basis for it, even if there isn’t. A bogus UCC 1 notifies the world that assets have already been pledged as collateral, or that there have been questionable secured transactions. A fake JL 1 can falsely suggest that your business lost a lawsuit.

Completeness, Not Validity

So the question is how does this happen? The California Secretary of State’s UCC unit is NOT responsible for making sure that the “debtor” authorized the UCC 1 or the person who filed it really has a judgment. It reviews UCC filings for completeness, not validity. Therefore, theoretically, anyone can file a JL 1 or UCC 1 against anyone. A false filing has no legal effect, but it remains on view and broadcasts to the world that the business owes the “creditor.” One example is a former customer who filed a false JL 1 claiming a $9 million judgment against the company. Another is a company that loaned money to a customer. The customer filed a false UCC 1 claiming the company owed it the loan balance and had a lien on its inventory. But what to do? If you notify the SOS, it will tell you that it does not remove UCC 1s or JL 1s without a court order or judgment from a California court.

Remove the UCC 1

So how does one deal with this problem? The first option is to reason with the filer and persuade them to remove it. The “creditor” can remove the UCC 1. Of course, anyone who would do this is not the type of person that takes requests very seriously. But it’s worth a try. Say, please. Say, pretty please. Problem solved? Well, probably not. If these people were nice and reasonable, they wouldn’t have filed the thing in the first place. So you still need a plan.

Next, you can file a UCC 3 (Financing Statement Amendment). The form has a field for the “debtor” to terminate the UCC 1. However, it does not remove the UCC 1 from the database. It merely adds the UCC 3 as a new document in the dropdown list of the UCC 1’s file. The public will still see the UCC 1 and must use its own common sense to decide that it was wrongfully filed. Your business name will still be searchable as “debtor”. You might have expected a UCC 3 to “cancel” the UCC 1, right? I did too, before I was told otherwise.

Third, you can file a UCC 5, Information Statement. This has boxes that you can check that say “is inaccurate”, “was wrongfully filed” and “filed by a person not entitled to do so”. There is a blank text box to allow you to explain in detail. But like the UCC 3, it doesn’t remove the UCC 1 or the name. So, you can file the UCC 5 form, but this won’t remove your name from the UCC search. It’s not a fun way to spend your time, but it’s something you can do.

Let’s talk about the notice of judgment lien (JL 1) next. The only way it can be removed is by the judgment creditor or its authorized representative. That means besides reasoning with the person, the only way to get rid of it is through a legal proceeding.

Sometimes a Lawsuit Is the Only Way

First, let’s admit: self-help remedies ain’t going to be all that perfect. Why? They’re self-help remedies. They may put a band-aid on the problem, but they won’t get you a court-ordered expungement or let you recover what the filing cost you. Sometimes, having to file a lawsuit is the cost of doing business in California. When this happens, the courts can provide an avenue for recourse. So you sue the “creditor.” Pretending that a business owes a creditor money (and writing it down in a public document) is in and of itself defamatory. So that means you can sue for defamation per se and trade libel. It can also be abuse of process, because the “creditor” is wrongfully using the Secretary of State - a legal process. But the biggest one of all? Cal. Code Civ. Proc. § 765.010. Under it, you are not allowed to file a lien or other encumbrance against someone when you know it’s false and you intend it to harass the person. A violation can open the door to expunging the filing, and a civil penalty of $5,000, plus the costs and fees that were expended by the business in litigating to get the filing expunged. (Cal. Code Civ. Proc. §§ 765.030, 765.040.)

A lawsuit may take time and resources. But sometimes a lawsuit is the only way you can get expungement of a filing, and sometimes a lawsuit will net the business damages and cover litigation costs on top of that. It’s difficult to see how self-help could trump any of this.

The Legislature is considering AB 501 which would increase the penalty from $5000 to $15,000, and allow a debtor to recover three times the court fees it pays to remove the unauthorized filing under the Commercial Code. As of January 15, 2026, the bill was pending review by the Appropriations Committee.