Sarah Edwards | March 23, 2023
Summary: Judgment liens, mechanic’s liens, and tax liens help creditors and governments recover funds from individuals who don’t pay their bills. If a lender has a lien on your property, the best way to remove it is by repaying or settling the debt.
When you finance a large purchase with a loan, your lender may place a lien on the asset you buy. Liens give the creditor the right to seize and sell your property if you don’t abide by your repayment agreement.
You may encounter liens in other situations, too. For instance, a credit card company or debt collector may seek a judgment against you. If they win, they can place a lien on your bank account or home for the outstanding amount due.
While the concept of a lien on your assets may sound frightening, liens reassure lenders if you default on your obligations. Without liens, obtaining financing for significant purchases, such as a home or vehicle, would be more challenging.
If you are struggling to keep up with your financial obligations and find yourself entangled in a debt lawsuit, SoloSettle can help you settle your debt and prevent liens resulting from a court judgment.
Several types of liens exist. A few of the most common include bank liens, judgment liens, mechanic’s liens, real estate liens, and tax liens.
Banks use liens to guarantee financing for costly assets like homes and cars. The lien remains in place until the consumer fully repays their outstanding debt. Once repayment occurs, the bank releases the lien and grants the consumer full title to their property.
A court can grant a lender or debt collector a judgment lien. To obtain the judgment lien, the creditor must file a debt lawsuit against the consumer and win its case. If the consumer doesn’t repay the debt before the court date or successfully settle the matter, the creditor will probably obtain the judgment lien from the court.
A mechanic’s lien occurs when a contractor improves a property but the customer fails to repay them. For instance, a customer who has a contractor replace their roof and doesn’t pay the company may be the subject of a mechanic’s lien.
The contractor will need to go to court to obtain the lien. If they’re successful, they can sell the customer’s assets to recover the payment due to them.
Is a contractor suing you for an old debt? Protect yourself from a mechanic’s lien by filing an Answer.
A real estate lien protects a lender from a borrower’s default on their mortgage. If the homeowner stops making monthly mortgage payments, the lender can seize the home and sell it to recover the remaining loan balance. Most mortgage liens automatically include a real estate lien in the loan.
Federal, state, or local governments sometimes impose a statutory lien. Most government liens are tax liens, which the government obtains when an individual fails to pay taxes. Usually, the government will try to work with the individual to repay the amount due via a settlement or installment plan.
Watch this video to learn more about how debt settlement can help you avoid a judgment lien:
The best way to remove a lien is by repaying the outstanding debt. For instance, if you have a mortgage, keep up with your monthly payments. You’ll pay off the balance according to the terms of your agreement. Once you make your final payment, the mortgage lender will transfer full ownership of the home to you and remove its lien on your house.
If the lien arises from a judgment or a tax authority, you must repay the outstanding amount due to remove the lien. Unless you repay the debt immediately or set up a payment plan, the lien holder may sell your property to recover the money.
A lender may accept a settlement offer for a lien. Settlements are common in judgment, mechanics, and tax liens. You’ll offer a fraction of the amount due in a lump-sum payment in exchange for removing the lien. Creditors will accept settlements if they believe they cannot recover the expected amount.
Let’s consider an example.
Example: Sarah has an unpaid credit card debt with Bank of America. She’s stopped paying the obligation, and Bank of America sues her for the outstanding amount due. Sarah fails to respond to Bank of America’s debt lawsuit against her, so the company wins a judgment lien. Bank of America uses the judgment lien to freeze her bank account. Sarah uses SoloSettle to send a settlement offer of 50% of the debt to Bank of America. The company counteroffers, and after a few rounds of negotiations, they reach an agreement to settle for 65% of the debt. Bank of America releases the lien from Sarah's bank account and dismisses the lawsuit.
Most liens protect banks and other entities from financial losses if a customer stops making payments. Judgment liens, mechanic’s liens, and tax liens help creditors and governments recover funds from individuals who don’t pay their bills. If a lender has a lien on your property, the best way to remove it is by repaying the debt or settling it.
Is a bank suing you for unpaid debt? Use SoloSuit’s Debt Answer template to respond.
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