Homeowners, just like anyone else, can hit financial difficulties at some point. Perhaps you weren’t able to make a few payments on an important debt. When this happens, a property lien may have been placed on your real estate.
What Is a Property Lien?
Very simply put, it is a piece of security that guarantees a debt against a property. The lien is part of public record, which means that it is a public statement by your creditor to say that they will get the money you owe them eventually. A lot of different types of liens can be placed against properties, usually either by court order or by contractor. Some of the most common types of liens include:
- The contractual lien, which is a voluntary agreement between the owner and the creditor, stating that the owner assigns a piece of property to their contractor in lieu of payment, until the property is sold.
- The judicial or court ordered lien, which is when a judge decides that the creditor is entitled to a part of the owner’s property. Legally, the creditor is then able to ask the sheriff’s office to assist them in taking possession of the property.
- The property tax lien, which has priority on all other types of liens, even the mortgage. The government is allowed to sell your property in order to collect unpaid taxes from you.
- The IRS lien, which is even more extreme than the tax lien. Here, a lien is placed not just against your real estate, but actually against all your possessions.
- The mechanics’ lien, which is filed by contractors that you owe money to for materials or work provided.
- The child support lien, which can be placed against you if you have defaulted on child support payments or alimony. This lien stays in place until all money is paid back.
How to Have a Lien Removed
There are a number of ways in which you can have a lien removed:
- Pay the debt. As soon as you present proof of payment, the lien will be removed.
- Dispute the debt. You are always allowed to say that the underlying claim is false. If you can prove this, then the lien will be removed by court order.
- Demonstrate bad faith payment demands, which means that the lien holder makes demands above and beyond what was agreed.
- Sell or destroy the property, although the selling of a property means that you should be able to satisfy the lien.
- Give the property to the lien holder.
- Prove that the lien holder has not exerted their rights and claimed the money back.
A bankruptcy will not discharge a lien. Rather, it could accelerate the process of collecting on the lien, as the lien holder will be one of the first creditors. It can take a long time to have a lien removed, unless you pay the amount in full.