What Constitutes a Lien?

A lien is a hold or claim on property due to an unpaid debt. This action provides the lien holder protection from the property being sold if the debt remaining unpaid. There are many consequences of a lien including inability to sell or refinance property, negative impact on credit score, possible wage garnishment and foreclosure. There are many different types of liens such as mechanic's liens, tax liens and debt collection liens.

Tax Lien

A tax lien may be placed on a property and the current owner will be responsible for it whether they incurred it or not. These types of liens may be the result of unpaid property tax or federal, state or local income taxes. If a tax lien has been placed on your property by the IRS, you may be in danger of wage garnishment. In any case, foreclosure is a possibility if the lien is left unpaid. A tax lien is a statutory lien and affects all property that you own, including your house and cars.

Mechanic's Lien

This type of lien is common. It is placed on property for unpaid labor, material and construction costs. While not able to result in wage garnishment, the property owner is unable to refinance or sell the property until the debt is settled and the lien holder may pursue foreclosure of the property in order to recoup their loses. This type lien is also a statutory lien.

Debt Collection Lien

A debt collection lien may be pursued by a company that is owed a debt on items such as automobiles, boats and credit cards. The lien holder must file litigation to levy the property, which will put a lien on it. The property owner will be sent notices of this action and be given the opportunity to make arrangements to pay off the debt before other consequences result.

Consensual Lien

A consensual lien varies from the previous sections in that it is agreed mutually upon by both parties. An automobile loans, first mortgages and equity loans are examples of consensual liens. The lien holder, or bank, agrees to loan the individual money, allow them to take possession of the item or money and agree to pay a set amount. If the owner does not pay the amount, the lien holder can take possession of the property.