Can Debt Collectors Put a Lien on Your Property?

If you become seriously delinquent on your debts, your creditors may take you to court to extract payment. If you cannot refute the validity of a debt you owe, you may end up facing a lien on your property. A lien grants your creditor the right to take money out of any sale you make of the underlying property, and is effectively a guarantee they will get repaid before you profit from an asset sale.

Getting A Lien

For most debts, you must agree to a contract promising to pay back the money you borrow. If you fail to pay on an unsecured loan, even a creditor with a valid case against you cannot take direct steps against your personal property as collection on the debt without going to court to get a lien. While a valid creditor can file and likely win a lawsuit against you if you fail to pay, it takes additional steps to get a lien against your property. Upon winning a lawsuit, the creditor is granted a judgment by the court. To enforce the judgment, the creditor must apply to the court to get a lien against your property via a judgment execution order.

Secured Rights

Creditors who have secured rights in your property already effectively have a lien on your property, whether or not they have filed a lawsuit to obtain one. A secured right is one you issue a creditor in exchange for a loan to buy certain property, typically homes and cars. Your creditors in these situations have the right to repossess or foreclose on your property if you fail to make payment.

IRS Rights

As far as collectors go, the Internal Revenue Service is generally the top dog. The IRS has broad powers to extract payment from you if you are delinquent on your taxes. Unlike other creditors, the IRS does not need to file a lawsuit against you in court to get a lien. If you do not pay, after sufficient warning the IRS has the right to slap a lien on your property, or even worse, to levy and seize your assets outright.

Liens and Bankruptcy

While bankruptcy has the power to wipe out your debts, it cannot always avoid liens. Secured debt usually survives bankruptcy, meaning you will have to make arrangements to pay off your mortgage or car loan if you wish to keep those assets. The same is true of IRS tax liens, which you remain liable for even after a bankruptcy discharge.