Are you owed money, but aren’t sure how to collect the funds? If so, a lien may be an option. A lien is a legal claim to property for payment of a debt. Usually, though not always, the debt is connected to the property, such as a lien against real estate for the payment of property taxes owed. This is a powerful legal tool, filed with the local recorder’s office.
What a lien does
A lien is attached to property, such as a car or house. Once a lien is filed, it can prevent the owner from refinancing, transferring, or selling the property. Liens also appear on credit reports, which can keep the property owner from obtaining additional credit or buying additional property. This creates an incentive for paying the debt owed, so that the lien can be removed from the credit report. Depending on the circumstances, once you’ve filed a lien the court may be able to force the sale of property to satisfy the amount due.
Types of Liens
There are several types of liens. One type, known as a construction, contractor’s, or mechanic’s lien, is a claim made by a contractor who has performed work on property (such as a home or vehicle) and has not yet been paid for the work. Liens can also be recorded for the non-payment of taxes or homeowner’s association dues. Another type of lien, for non-payment of child support, can be placed on the parent’s property until back child support has been paid.
Finally, a Judgment Lien is the name for a lien placed against someone’s property as the result of a lawsuit. If you have won a small claims suit or another type of lawsuit, and the other side owes you money, this may be a way to collect the funds. Often, people who win a lawsuit come to realize that collecting on a judgment is difficult. A lien is one strategy to get the other side to pay.
How to file a lien
The process for filing a lien varies by state. Typically, the lien is recorded with the local recorder’s office, after you have proven that the other party owes you money. The person who has filed the lien (who is also the person to whom the debt is owed) is known as the lien holder. The lien usually lasts a period of ten years, at which point it may be renewable. The lien may also be removed once the amount owed is paid.