If a person owes a legitimate debt but refuses to pay up, creditors enjoy recourse to the court system to compel repayment. Although several options, including wage garnishment and bank levies, may work for most debt recovery, some people who are paid "under the table" may not have cash to seize. In that case, a lien against the debtor's property -- including cars and boats -- may be the best bet.
If the debtor is a customer who fails to pay for goods or services related to the repair of a boat, the person who incurred expenses -- time or materials -- can file a mechanic's lien. This document places a hold the boat's title, preventing the transfer of the title until the lien is cleared, and allows the lien holder to seize the boat and sell it at auction to recover his expenses. Mechanic's liens vary from state to state, and each state has different standards about the priority of payment on a lien (for example, if the boat is financed, the proceeds of the sale may go to the financing company first, and the mechanic's lien holder may not recover his costs in full).
If the debtor is a customer who operates a boat, and the boat was involved in some sort of injury to you (e.g., the customer's boat rammed your dock), you can file a maritime lien. This is essentially the same thing as a mechanic's lien, except it follows the customer's boat from port to port and the boat may be seized at any port it visits.
Placing a Lien
Customers who owe debts in general -- even obligations unrelated to a boat -- may nevertheless be candidates for a judgment lien against a boat. For example, if a customer owes you $10,000 because you landscaped his property, and the customer refuses to pay what he owes, the first step is to sue him in district court. If the judge rules in your favor, she will issue a debt judgment. With that judgment, you can attempt to collect by either selling the judgment to a third-party debt collector or by attempting to garnish his wages or levy his bank accounts.
If garnishment doesn't work and the debtor refuses to pay, you can file liens against his personal property. Procedures vary by state, but in general, you visit the county courthouse in the county in which the boat is located or registered. You find the title in the clerk's records, and fill out a form -- usually accompanied by a copy of the debt judgment -- and pay a small fee. The lien will then attach to the boat's title.
A lien impairs the transfer of a property title between owners. If a boat has a lien against it, and the boat owner wants to sell the vessel, he must first discharge the lien by paying off the amount he owes or negotiating with the lien holder to extinguish the lien through a settlement offer.
In general, the sale of an asset usually means the lien is paid off as a condition of sale, but if the lien is worth more than the boat, then the owner may find he cannot lawfully transfer ownership of the boat except at a significant loss. Although the regulations vary by state, in general, a lien is good for seven years and can be extended -- for example, Illinois allows liens to extend to a maximum of 20 years.
In most cases, a lien holder can foreclose on the lien, meaning that he can force the boat's seizure and sale at public auction. Foreclosures may be tricky; it may cost more to seize and sell the boat than the boat is worth, and if there are other lien holders, the foreclosing agent may not receive the amount he expects.
- Illinois Legal Aid; How Do I Place a Lien against Someone's Real Estate to Collect on a Judgment?; John Roska; December 2005
- Marine Liens: What Is a Maritime Lien?
- 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.
Jason Gillikin is a copy editor and writer who specializes in health care, finance and consumer technology. His various degrees in the liberal arts have helped him craft narratives within corporate white papers, novellas and even encyclopedias.