What Is a Lien and How Does It Work?

A lien is a claim against someone else’s property that provides security or collateral when one party loans money to another. If you are paying off your car or your home, chances are you have a lien on your property. If you fail to make your car payments or home loans, for example, the lender has a right to your car or home, so they may choose to repossess your vehicle, stop you from selling your home, or otherwise use your property to recover their investment.

Having a lien on your property is the opposite of having a “clean” title, so liens often get in the way when people try to sell their cars, loans, and other assets.

What Are the Different Types of Liens?

You may agree to a lien on your property when you take out a loan – usually to pay off a car or home. Liens can also be involuntary. If you owe a creditor, they may ask the courts to place a lien on your property to increase their chances of being paid back.

Governments, financial institutions, and even small businesses can put liens on your property. The most common types of liens include:

  • Bank liens – a lien the bank places against your property when you take out a loan to purchase an asset (e.g., a car loan).
  • Judgment liens – a lien the courts place on your asset(s) as the result of a lawsuit (often requested by creditors)
  • Mechanic’s liens – a mechanic goes to court and asks for a lien against your car because you failed to pay them for services rendered (construction workers and other professionals can also ask for a lien to secure payment)
  • Real estate liens – a lender has the legal right to seize and sell real estate property if a contract is not fulfilled (mortgage liens are a type of real estate leans)
  • Tax liens – the government can put a lien on your property if you fail to pay taxes

In some cases, lienholders will use their rights to seize and sell your property and pay themselves back. More often, liens come to light when people try to sell their property. If you try to sell a property with a lien on it, you must get permission from the lienholder and use (at least some of) the proceeds to pay back your lender or lienholder.

How to Get – or Get Rid Of – a Lien

If someone owes you money, you can file a lawsuit and ask the court for a lien. This is especially true if the debt is tied to a “real” asset, like a car. Occasionally, the court will grant liens on a debtor’s paycheck or bank account.

If you want to remove a lien on your property, the simplest solution is to pay the attached debt. If you don’t have the money, you can try negotiating with creditors, and if the lien is incorrect, you will need to contact the lienholder.

In some situations, you can get liens released by filing for bankruptcy. When you file for bankruptcy, you will either sell some of your assets, pay creditors as much as you can, and get a fresh start (Chapter 7), or create a sustainable repayment plan that allows you to pay off as much of your debts as possible in 3 to 5 years (Chapter 13).

Do I Have to Go to Court?

The amount of time (if any) you spend in court depends on the details of your situation. If you need to place a lien on someone else’s property, you will likely have to present your case to a judge in order to get the lien.

If you want to remove a lien, you can settle your debt without going to court. Nevertheless, you will need to go to bankruptcy court if you choose to file for bankruptcy.

No matter what you’re dealing with, Busch, Reed, Jones & Leeper, P.C. can help. We have 150 years of combined experience, and our team is up-to-date on all of Georgia’s lien laws.

We know what it takes to protect your business and your future, and we offer FREE CONSULTATIONS.

Call us at (770) 629-0154 or contact us online to get started with one today.