There are many different kinds of liens, but the basic definition of a general lien is that it’s a legal claim against something you own and is used to secure a loan.
(when I was fighting with collection agencies, they were always threatening to get a lien against me. Even though I got rid of the debt before they could get a lien against me, it was scary to see these notices in the mail.)
If you have not completely paid off a debt, then the lien is not released and you are not able to sell property. Liens are used to protect both consumers and lenders, and may work in your favor depending on what the situation is.
Example of a General Lien
A good example of a general lien is a car loan. The bank or financial institution lending you the money places a lien against the car you’ve just bought. Legally, they still own the car, even though you are responsible for paying the monthly payment until it is paid in full. You don’t truly “own” the car until the lien has been satisfied or “released.”
If you decide you want to sell the car, and the debt is still not paid, the lien prevents you from selling the car. If you are delinquent on any of the payments, the bank can repossess or seize the vehicle until you bring the payments up to date.
Defaulting on a loan enables the lien holder (the bank) to garnish your wages. It will be listed on your credit report as a bad debt and the lien will still be held against you. The only other way you can have the lien removed is to file bankruptcy, which is an extreme measure.
Some types of liens actually protect you as a consumer. Say you’ve hired a contractor to install new kitchen cabinets. You agree on a price and pay him ½ of the money upfront. The contractor works for a few days, then doesn’t show up for the job and doesn’t answer the phone number you were given.
You are allowed by law to file a Mechanic’s or Contractor’s Lien. This is a legal document that places a hold on any funds in his business checking accounts. It becomes a garnishment against his collection of any other funds from other jobs. Your claim must be satisfied before the lien against him is released.
Finally, the Internal Revenue Service can place a Tax Lien against any taxpayer who has not paid their income tax owed. The government will freeze your funds in any checking or saving account, and will not release the funds until the debt is paid.
Some creditors get over zealous when placing a lien against you. Not only does this put a lien against your property, but it also shows up on your credit report.
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A lien on credit report will stop you from getting any new credit such as a new mortgage. You can get immediate help to dispute questionable liens from a credit repair attorney like we did. Get a FREE credit consultation with credit repair experts by calling 1-800-298-4297