A lien amount is a sum of money owed to a person who has won a judgment. To recover the funds, that individual can place a lien, essentially a hold, on an asset controlled by the subject of the judgment until the lien is paid. Liens can be levied on real estate, bank accounts, and many other types of assets. When a lien is placed on an asset, people are entitled to information about the amount of the lien, who the funds are owed to, and how to resolve the matter. Until the funds are paid in full, the hold will remain in place and the person will not be able to use the asset in question freely.
A common place for people to encounter information about a lien is on a bank statement. If someone owes money and a judgment is entered against the person, a lien can be placed on the debtor's bank account. The bank is required to withhold all of the funds from the customer, or to make periodic withdrawals to pay the debt in installments, depending on the size of the debt and the specifics of a court order. When a bank statement mentions a lien amount, it means someone has entered a lien against the customer's account for nonpayment of a debt.
People can also look up lien information on homes, cars, and other assets. A common source is a mortgage or car loan, where the lender uses the asset as collateral for the debt. In addition, other people can place liens on assets if a person is not repaying a debt. For example, tax authorities may place a lien on a home until someone pays back taxes, and contractors can place one on a house for nonpayment.
As long as a lien is in place on an asset, the asset cannot be transferred without authorization and the title is not clear, making it difficult to sell. Someone with an outstanding lien on property may be able to make an arrangement to sell it and pay the amount owed with the proceeds of the sale, thereby clearing the title so it can be transferred.
If someone notices that a lien has appeared on a bank account or another asset, he or she should get information about it. Sometimes, liens are applied in error, so it is important for the subject to confirm the origins of the judgment. If it has been applied inappropriately, it should be challenged as quickly as possible to get the lien off the asset. When one is applied appropriately and someone has finished paying the lien amount in full, the person should confirm that the lien has been removed, clearing the title of the asset.
What Is a Lien Hold?
A lien hold refers to an amount of money that has been set aside in a judgment or settlement to pay for a debt to a third party. The third party has the right to file a claim against the judgment or settlement to make certain they receive the money they are owed.
Lien holds have to do with assets such as mortgages or vehicles. There are many different types of lien holds including bank liens, mechanic’s liens, tax liens, judgment liens, and real estate liens. There are some differences between these categories. For example, a bank lien is common when someone takes out a loan to purchase an asset. If the loan is used to buy a vehicle the bank reserves the right to seize the vehicle if the lien is not paid which they will then sell to pay the lien. In contrast, a judgment or judicial lien is a result of a lawsuit and may be used to ensure a defendant is paid what they are owed according to a court.
Liens can be involuntary or consensual. An involuntary lean is often the result of a lawsuit in which a creditor seeks payment. In this instance, the lien is typically placed on assets or bank accounts. A consensual lien might include a lien set aside to pay for an asset such as a home or vehicle in an agreement between the creditor and borrower.
The government can also use liens to inform anyone interested in purchasing an asset that a lien must be released before a purchase.
What Is a Floating Lien?
A floating lien can be used by a creditor if the subject of the lien has an unfixed value. This means that the individual assets are not specifically identified but are rather a general set of assets. In contrast, with a regular lien, the loan is secured by the asset itself.
This is often used by retailers who can put up their accounts receivable or inventory as collateral. Since the retailer’s inventory is constantly circulating, the creditor does not have to identify what will be seized if the lien is unpaid.
If a floating lien is not paid, the lien “crystallizes” into a fixed amount. This means that the borrower cannot freely use or sell their assets until the debt is paid.
How Do You Remove a Lien Amount?
To remove a lien on an asset the loan must be paid for in full. Once paid, the borrower can file a release of lien form which removes the lien from the asset. The procedure can vary by jurisdiction. Liens can also expire on their own if no action is taken by the creditor as liens are subject to a statute of limitations.
Liens can be negotiated in other ways. For example, a creditor may agree to release a lien if the borrower consents to higher monthly payments. A court can also lift a lien if it’s determined that the lien was fraudulent, coerced, or brought forward in bad faith.
What if a Lien Amount Is Not Paid?
The result of an unpaid lien amount is often the seizure of the subject of the lien. For example, if the lien is in regards to a home mortgage, then the property may be seized to pay for the lien. If a lien is used to purchase a vehicle the vehicle will be seized and sold. With a judgment lien, an unpaid lien may result in assets being liquidated to pay for the party that is owed the lien.
In the instance of an asset not being worth the value of the lien other methods may be used by the creditor to collect. The creditor may garnish wages or bank accounts to help pay for the full value of the lien. If a bank account is garnished the bank will typically freeze the borrower’s funds until the debt is paid.
There is limited legal protection for those who cannot pay a lien depending on the context. In most states, there is a homestead exception law that protects a borrower’s property from creditors even if the borrower is unable to pay the lien. In the context of Chapter Seven Bankruptcy, a borrower can remove a portion of their debt if the lien is judicial, but generally only for a certain amount of time.
You might have heard the myth that a credit card company can place a lien on an asset to collect on a debt, but this is illegal. Credit card companies do not have this right.