Tuesday, April 28, 2009

Can a Non-Active Corporation File Lien Against Homeowner?

Can a Non-Active Corporation File Lien Against Homeowner?

Where corporations are concerned, non-active does not mean dead. In fact, with the exception of conducting business, there is very little an non-active corporation cannot do. This means that even though a corporation is non-active, it still may place a lien on your home. Fortunately, once a corporation moves from non-active to terminated status, the threat of it placing a lien on your home should cease to exist.

Dissolution

    A corporation may file a lien on a homeowner even though it is inactive. Dissolution is the process of terminating a corporation's existence. Dissolution does not happen instantaneously, it is a process. Dissolution may come about voluntarily or involuntarily. While every state has its own laws governing corporations, voluntary dissolution generally comes about when a corporation files articles of dissolution or similar documents with the Secretary of State. Involuntary dissolution, on the other hand, occurs administratively. Administrative dissolution happens when, among other things, the corporation fails to pay annual fees or becomes involved in fraud.

Winding Up

    An inactive corporation may file a lien on a person's home during the winding up process. The winding up process is the stage of corporate dissolution where the corporation's officers liquidate the corporation's assets and distribute the proceeds to the corporation's owners. The right to sue and recover money owed may be considered an asset. Accordingly, some inactive corporations may file suit and obtain judgment liens on people's property during the winding up process. Winding up occurs after the corporation files Articles of Dissolution with the Secretary of State.

Judicial Lien

    A lien allows the inactive corporation to sell the attached property, thereby turning it into more cash for its owners. However, the corporation typically would have to sue to obtain a lien. Lawsuits involve hiring and paying lawyers, as well as paying court costs and filing fees. Since the corporation is no longer operating, it is unlikely that it will incur the expense of pursuing a lien on a person's home unless the numbers justify it.

Certificate of Termination

    Once the Secretary of State issues a certificate of termination, the threat of a lien being placed on your home generally will no longer exist. The certificate of termination is like the corporation's death certificate. The Secretary of State's issuance of the certificate signals the end of the corporation as a legal entity. Corporations generally must file their state's equivalent of a request for termination after the winding up process is complete. By completing the winding up process, the corporation effectively says that all its affairs are complete and there is nothing left to be done.

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