Lenders and service providers can place a lien on an individuals property, which basically turns the property into collateral until any outstanding balance is paid in full. In the case of a mortgage the lien is termed consensual, especially for second mortgages. The term mechanics liens means financing for improvements to the property.
A lien may also be non-consensually imposed, frequently by tax authorities to secure the payment of taxes and penalties owed or by the courts to secure the payment of amounts handed down in a judgment. Although there are many types of liens, all of which have different effects, most liens have three primary effects.
The corollary to having a lien placed against a property is that under certain conditions the creditor has means to take control of the property. While most of the time in the United States, a lien does not mean that a creditor will take control of the property but it can sometimes. There are many different kinds of liens and they spell out whether or not a creditor will be taking control of the property. The ultimate reason for placing a lien is not to take over a property but to create collateral for the person who is owed money. It is important to not that most leans are exempt from being discharged in a bankruptcy.
The next thing that happens because of a lien is that the property owner loses the ability to sell or transfer ownership of the property under lien. Because the lien creates collateral for the creditor the owner is restricted. Furthermore, a property that is under a non-consensual lien will not attract property buyers or lenders that use property for collateral. The effect is that the property own is completely tied to his obligations.
The third consequence of having a lien placed on property without your consent is that it has a fairly devastating effect on your credit score. The credit reporting agencies will treat the lien as an outstanding loan amount. One lien of significant amount can do plenty of harmful mischief on your credit report, and quickly too. Paying off the amount of the lien can turn this around. The credit report will then reflect a payment history rather than a delinquent amount owed. Just like any other negative reports, a lien will stay on the credit report for seven years.
Having a non-consensual lien placed against ones property can be a real problem and should be avoided if at all possible. Because most U.S. states have their own laws related to liens, many of which make it extremely easy to file a non-consensual lien on someone elses property, these devices have frequently been abused. Despite this abuse, a lien can still be a nightmare for property owners. It is strongly advised to be wary of liens and to take threats of having them imposed very seriously.
Wendy Polisi is the founder of Credit Repair College and Finance the Dream. Credit Repair College empowers people to take control of their financial future by learning everything they need to know to repair credit on their own. For more information on credit repair please visit them on the web. Finance the Dream offers rent to own houses throughout the United States.
