How to File a Lien Against a Business That Is Not Paying
Businesses typically work with other companies on credit, providing goods or services up front and billing for the payment later. If a company does not pay you for your work in a timely manner, you can place a lien against its property to recover the amount of your debt. A lien gives you a security interest in the debtor's property and prevents it from being transferred or sold. Even after it the company pays in full, the lien may stay on the company's credit report for years.
You must first be able to prove your debt is valid. The best way to demonstrate the debtor's legal obligation is with a contract or estimate with a signature from someone with authority to sign on behalf of the company. Make sure the contract is with the company itself and not an individual employee. Copies of your hourly invoices are usually sufficient proof for lawyers, accountants and other professionals. Provide invoices showing material and labor charges for construction jobs or equipment repairs.
You cannot file a lien until you obtain a judgment from a court ordering the debtor to pay. File your complaint and pay the applicable court fees. Include all documentation demonstrating the validity of the debt. The debtor will have an opportunity to show why the debt is not valid or provide proof of payment such as a credit card statement or canceled check. If the debtor's evidence is not sufficient, the court will likely rule in your favor and award a legally binding judgment against the debtor.
File the judgment with the county clerk to place the actual lien on the debtor's property. List the name of the debtor and all assets affected by the judgment. Recording the judgment serves legal notice that you have a claim against the property and prohibits the debtor from selling or transferring it without paying the debt. For liens on cash or investment accounts, you must send a copy of the judgment to the bank or broker that holds the account. Contact the local department of motor vehicles to file a lien on automobiles, boats and recreational vehicles.
You may seize the property and sell it to satisfy your debt at any time after recording the official court judgment. For real property, this is usually done through a sheriff's sale and auction to the highest bidder. The lien remains in effect if the proceeds from the sale are not enough to cover the full amount of the debt.
Contractors, subcontractors and suppliers may place a mechanic's lien on property they have serviced without obtaining a court judgment. You may be required to post a preliminary notice in some states. Mechanic's liens do not grant the authority to foreclose on the property. Upon payment of the invoice, the property owner must request a lien release form as proof that the debt is satisfied.