When you owe someone money, one of the ways that they can collect it is to place a lien on your house. This makes it impossible for you to sell the house without repaying your debt. In some cases, it could result in you being forced to sell your home.
What Is a Property Lien?
A property lien is a type of encumbrance that someone can put on your property when you owe them money. When a lien is placed on the property, you have to repay the debt that is attached to the lien before you can keep any of the money that is generated from the sale. Once a lien is placed on the property, you can have it removed by paying the debt, or you can pay it when you sell the property.
Voluntary Lien
One type of lien that is commonly used is a voluntary lien. With this type of lien, you voluntarily give someone a claim against your property to secure a loan. This is typically the case when someone uses a lien to secure a mortgage. If you do not pay your mortgage payment, the lender can foreclose on the property. This type of lien can also be used for a home-equity loan or a home-equity line of credit.
Creditors
When you owe a creditor money, it could file a lien against your property. A creditor, such as a credit card company or a medical provider could file a lawsuit against you in civil court. Then when it receives a judgment against you, the creditor can use this judgment to file for a lien on your property. The creditor then takes the judgment to the local land records office to file a lien on your property. It can collect money when you sell the property.
Mechanic's Lien
A mechanic's lien is another type of lien that can be used on your property. With a mechanic's lien, a contractor places a lien on your property after working on your house. For example, if a contractor came and installed a new roof for you and you did not pay your bill, the contractor can then file a mechanic's lien against the house. This helps him eventually collect the amount of money that he has tied up in the house.
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