A lien is a claim on one individual’s property by another person or entity. The party that holds the lien is able to recover the property if a debtor will not follow through with making payments. There are also other circumstances in which liens would allow the lien holder to take the property. Mortgages on houses or buildings prove to be one kind these. Vehicle loans for a business or individual represent other types that are put on the value of the vehicle. When the obligation is paid off, the lien becomes discharged.
Before individuals are able to receive their money after the sale of an asset like a car or house, the lien must be paid off first. With a vehicle, this means that the lender will not send out the title until they receive complete repayment of the principal.
The majority of liens allow for the individuals or businesses to utilize the property as they are paying it. There are scenarios where the lender or creditor physically holds the property while the borrower is making payments. These are a part of bankruptcy procedures as well because they are secured loans with debt repayment rules that have to be addressed in a case.
While there are a number of different types of liens, the most typical one is on a vehicle. Individuals buy a car from the dealer. The bank loans the money and secures the loan. They do this by placing a vehicle lien which allows them to hold on to the automobile’s title. The lender files a UCC-1 form to record this. So long as the debtor continues to make payments, the loan will be paid off finally. The bank would then release to the individual the title.
If the individuals stop making their payments, the bank is able to take possession of the vehicle back while still holding the title. If the vehicle owners choose to sell the automobile when they still owe principal, they must clear the bank loan in order to obtain the title. Without the title, a person can not sell the vehicle.
There are a variety of different types of liens in the world. Consensual ones are those which individuals voluntarily accept when they buy something. Non consensual ones are also known as statutory. These come from a court process where an entity places a lien on assets because bills have not been paid. Three of these are fairly common.
A tax lien occurs when individuals do not pay local, state, or federal income taxes. These are put on the offender’s property. A judgment lien comes as a result of a case in a small claims court. When a court gives a judgment to one party, the offending party might refuse to pay. In this case the court will place a judgment lien on the offender’s property.
A mechanic or contractor lien happens when a contractor performs a job for a home owner. If the owner refuses to pay, the contractor can ask a court to place a lien on the property in question. This would have to be paid off along with other security interests before the property owner is able to sell.