A lien is a claim a company or individual makes against your property due to a debt you owe. If you own a home, your lender will place a lien on your property until the home mortgage is paid. Credit card companies, construction contractors, and the Internal Revenue Service can also place liens against your home. When you purchase a car, a lien is placed against the vehicle until you make the final payment. Removing a lien requires you to pay the debt or renegotiate the debt amount.
Determining Type Of Lien
01: Analyze situations that may result in a lien being filed.
A lien is a security interest placed on property. A security interest means that the property serves as security for a debt you owe to another party. The property may be real property (home) or personal property (car, jewelry).
- When you purchase a home, you enter into a home mortgage. Your bank takes a security interest in your home, which is considered real property. If you don’t make the required mortgage loan payments, the bank can recover the amount they loaned you by taking possession of your home and selling it.
- Assume that you buy a car and take out a car loan. The bank will take a security interest in your car. Just as with your home, the bank can potentially take possession of your car and sell it. The sale proceeds allow the bank to recover the amount that they loaned to you.
- Lenders incur huge costs to repossess a home or a car. In reality, most banks would rather work out a repayment plan with a borrower and avoid repossessing property.
- One possibility for removing a lien is to renegotiate your loan balance. That may include a lower monthly payment, a reduction in the interest rate or a longer period to repay the loan.
02: Review the concept of a tax lien.
A tax lien is a process performed by the Internal Revenue Service (IRS). This type of lien is placed because of an unpaid tax debt. A tax lien provides public notice to all of your creditors that the IRS has a claim against all of your current and future property until you pay the debt.
- The IRS considers a tax lien as a last resort when they are attempting to collect taxes owed. Because of the cost and time to place a lien, the IRS may be willing to enter into an installment agreement.
- With an installment agreement, the taxpayer agrees to make specific payments on an unpaid tax debt over time. As long as the payments are made on time, the IRS will not file a tax lien.
- If you cannot pay your current tax liability, it’s critically important to contact the IRS. You can explain your situation and ask about an installment agreement.
- A tax lien can have a big impact on your financial situation. The lien will hurt your credit rating and may prevent you from borrowing money. Also, a tax lien will not be discharged if you file bankruptcy. It’s important to avoid a tax lien, and to take steps to get the lien removed.
03: Consider liens that are the result of a court order.
A lien placed on your home or car is considered voluntary. The borrower understands that placing the lien is part of the loan agreement. Other loans are involuntary. A lien filed as a result of a court order is an involuntary lien.
- In involuntary lien is filed based on a judgment granted by a judge.
- A property lien against your home can originate from a divorce or child support judgment. In this case, an individual has been instructed by a court to make payments and has not done so.
- If you have had work completed on your home and the contractor accuses you of failure to pay all fees, the contractor can file a mechanic’s lien against your property.
- In most cases, you will need to retain an attorney to help you get a court ordered lien removed. An attorney can help ensure that the legal paperwork is processed correctly.
Credit Target has helped hundreds of thousands of clients take action and repair their credit, since being founded in 1977.
We can dispute anything From bankruptcies, to charge-offs, tax liens, late payments, repossessions, foreclosures and judgments. During our 40 years of combined experience in this industry we have challenged hundreds of thousands of credit issues, which resulted in thousands of happy clients with there credit and finances restored within the last year alone. Credit Repair requires taking specific actions with your creditors rather than making ineffective disputes for credit bureaus. We assist you with the questions you are legally entitled to ask and present you with the rights from the consumer protection act in order to achieve a resolution on for your credit issue.