What Is A Lien?
by Dutch Kiesecker

A lien is a legal claim on an asset that grants the lien holder permission to take possession of the property if certain conditions aren't met. Houses and cars are common types of property that have liens. Until the mortgage or auto loan is repaid, the lender has a lien on the property. The lien lets the lender foreclose or repossess the property if the property owner lags with payments.

If your property has a lien on it, the lien holder can sell it at anytime to satisfy payment for your debt. Before you can sell property and transfer the title to the buyer, you have to own the property free and clear. You should have any liens removed from the title before you can sell the property.

Some liens are placed on your property automatically as a circumstance of purchase. These lien holders have a legal right to take control of your property if certain conditions aren't met. For example, when you buy a house, your mortgage lender will place a lien on the house until you repay the mortgage. Similarly, your auto lender puts a lien on your card until your car loan is paid.

Other types of liens are placed on your property because you did not pay a debt. For example, if you fail to pay your federal or state taxes, the revenue department could file a tax lien on your property. If you don't pay the debt, the lien holder can liquidate the property and use the proceeds to pay off the debt.

A judgment lien is the result of a lawsuit in which the judge ruled against you. Before a judgment lien is put on your real estate, the creditor usually has attempted (unsuccessfully) to get you to pay off your debt. You may have to pay interest on the judgment lien. A judgment lien could be reported on your credit report.

Liens are usually placed on your property as a condition of repayment. Usually you are able to remove a lien on your property by fully paying off the loan or debt attached to the asset. If you have a lien placed on your property because of an unpaid debt, you may be able to have the lien released by simply making arrangements for payment.

Even when the lien is lifted from your property, it might still be included on your credit report for up to seven years. A paid lien looks better on your credit history. An unpaid lien, on the other hand, can keep you from getting credit cards, loans, and even jobs.