A lien is a legal claim on someone else's property. If someone owes you a debt and refuses to pay, placing a lien on real estate she owns is one way to pressure them to pay up. You'll need to go to court before you apply the lien, and even then your state's law may give the debtor some protection.
Types of Liens
Depending on your situation, there are several types of lien to choose from. Contractors and suppliers who work on a house can use a mechanics lien or contractors lien to collect on unpaid debts. In divorce cases, you may be able to apply a lien to collect child support, or to make sure you get paid when your spouse sells the house. If you don't fit into any other category, you can sue in court to have a judgment lien placed on your debtor's property.
To collect on a judgment lien, you'll have to follow your state's procedure for filing a lawsuit. You will have to send someone to serve your debtor with papers notifying him of the suit and then present evidence at the court hearing. If the judge confirms the debt, you can take documentation of the judgment to the county where the defendant owns property. The county recorder will then place notice of the lien in the registry of deeds, making it official. Anyone who buys the property takes the lien along with it.
A lien gives you the power to foreclose on property. If you do that, any previous liens on the property, including the mortgage lien, will be paid off first, so you may not get your money. Another approach is to wait until your debtor tries to sell or refinance. Few lenders will write a mortgage on property with a lien already on it, so this gives your debtor an incentive to settle with you.
Most states grant homeowners an exemption on their personal home that limits your ability to collect with a judgment lien. As of 2011 in California, for example, you can't foreclose unless the home is worth more than the mortgage debt plus $50,000, and some homeowners have an even larger exemption. If your debtor files Chapter 7 bankruptcy, it's possible she can void any judgment liens on her property. And eventually your judgment lien will expire, unless you file to have it renewed.
- eNotes.com Inc.: Contractors/Liens
- Nolo: Collect Your Court Judgment With a Real Estate Lien
- Moran Law Group: Avoiding Liens in Bankruptcy
- Bay Consumer Law: The California Homestead Exemption
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.