Different Types of Liens

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types of liens


When people typically think of liens, only a couple of different ones come to mind. The two most common ones are car liens and mortgage liens. Although they have been most common, they are other different types of liens that you might have not thought of.

In this article, we will go over the different kinds of liens and define them in detail. Hopefully, at the end, you’ll have a good grasp on how they work and avoid some of them. Let’s hop right into it.

What is a lien?

A lien in its simplest form is defined as a claim on something against assets that are typically used as collateral to satisfy a debt. Let’s look at an example. When you finance a car with a loan, the bank has a lien on the car. That means, if the debt is not paid back as agreed, the vehicle can be repossessed by the bank.

What are the different types of liens?

Liens can either be voluntary or involuntary.

  • Voluntary Lien – as the name suggests, this is when the owner of the property voluntarily consents to have a lien placed on their property. An example is financing the purchase of a car.
  • Involunary Lien – unlike a voluntary lien, an involuntary lien means the property owner did not give the express consent. This can result from a judgment lien placed against them in a lawsuit.

In this article, we will focus primarily on property liens. These will encompass real property and personal property, basically anything physical, Like a house or a car. There are also title liens used in situations such as when somebody borrows money to purchase a car. The lender will have a lien on the title and can possess the car is not paid back.

Property liens are typically the most valuable type of lien, and as such, typically has liens placed against them. It’s easy for lenders to possess valuable assets as they are easier to sell.

The different types of liens typically are:

1. Mortgage liens

As the name suggests, a mortgage lien is used when a bank lends money to purchase or refinance a home. Since the home will have a lien on it, if the borrower fails to pay back the debt, then the lender can repossess and foreclose on the home. This is done to pay back any unpaid balance.

2. Tax liens

When an individual fails to pay their taxes, the IRS can place a lien on their property for any unpaid taxes. Unlike mortgage liens, this typically does not result in foreclosure. Instead, the lien will remain on the home until It is paid back.

3. Mechanics liens

If a contractor or mechanic works on a property and they are not paid as agreed on, then they can place a mechanic’s lien on the property. This is also called a construction lien. In this case, the home buyer cannot complete the purchase of the home until they fulfill their obligations to this mechanics lien.

4. Judgement liens

Judgment liens typically occur as a result of a lawsuit. If the party loses in a court case, and the court awards damages, then the Judgment creditor can place a lien on the debtor’s property.

Does a lien affect your credit score?

This ultimately depends on your situation and how the lien came about. If the lien was from bad or unpaid debt, then this lien can impact your credit score negatively. If the lien is a result of financing a new car or a house, then the fact that you opened a new line of credit will also affect your credit score by lowering it slightly.

Always remember to verify with your tax attorney or specialist the impact of getting a lien on your property has on your credit score.

How do I get rid of a lien?

1. Pay off the debt

Legally, the easiest way to get rid of liens is to simply pay off the debt. The reason liens exist is to protect lenders against any unpaid debt. That isn’t an easy way to just get rid of them, since they are legally binding.

You don’t know where to start or cannot handle the liens on your own, then you might need to reach out to a professional and or an attorney. They can help you file any necessary documentation, read the fine print and help you navigate any lawsuits you might have.

2. Dispute the lien

If you believe that a lien you have on your property is invalid or fraudulent, then you can dispute the lien. Of course, you only want to take this route if you are certain that the lien can’t be disputed.

Lien’s are no joke. Work on sticking to your budget and only purchasing things that you can afford. If you stick to that, you will less likely end up with liens on your personal property.

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