When you have an outstanding debt, the creditor may take out a lien against property you own. This means they legally claim ownership of your property until you satisfy the debt. This can prevent you from selling or refinancing your home and may force you into foreclosure.
11 Types of Liens Homeowners May Encounter
Property: If you don't pay according to your mortgage contract, the lender can secure a lien and eventually seize the property.
Uniform Commercial Code 1: Similar to a property lien, but specifically for co-op owners.
Home Equity Lines of Credit or Second Mortgage: Similar to a property lien, but specifically for secondary loans.
Property Tax: When notifications of outstanding taxes are ignored, a lien is secured.
IRS: These are issued when you fail to pay local or federal taxes.
Vendor Contract: If you agree to a payment schedule for expensive home repairs, failure to pay as agreed can lead to a lien.
Mechanic: These are placed when you fail to pay for standard home services, such as failing to pay the gardener or plumber.
Judgments: If a lawsuit ends with a judgment against you, the plaintiff may place a lien on your property.
Credit Card: Credit card companies can file a lien on your property after securing a legal judgment.
Environment Control: These liens only occur if you fail to clean up an environmental hazard on your property.
Tickets: Liens are sometimes secured due to unpaid traffic tickets.
In order to clear a lien from your property, you must provide the county clerk's office with written proof that the debt was paid in full. You will have to pay late fees, collection fees and other added charges in addition to the amount originally owed, so it's always better to take care of your bills before a lien is placed. Most creditors will work with you, so don't avoid their phone calls. In the case of a dispute with a service provider, it is in your best interest to settle rather than withholding payment.