Liens: What they are and what to do if one is placed on your home

A lien occurs when a legal claim is put on a property in order to receive payment for debt or for services rendered. The holder of the lien can sell the property in order to recover the money owed.

A lien can be placed on assets almost any time you have an unpaid debt. A creditor files a lien in the county office stating that they have an interest in your property. It basically gives the creditor a financial stake in your home.

A lien will prevent you from being able to sell, mortgage or take a home equity loan on your home until the lien is lifted. Although there are a number of different types of liens that creditors may place on your home, there are three that are most common.

Mechanic's lien

When a general contractor builds your home, they will very likely file a mechanic's lien on the property to ensure they get paid for their work. Subcontractors and repairmen - including plumbers, painters and carpenters – may also file a mechanic’s lien if they aren’t paid.

Judgment lien

If you’re involved in a lawsuit and you lose, the winning party of the lawsuite can file a judgment lien against your home until the payment is collected. This type of lien can also be imposed by an attorney if you do not pay for legal services.

Tax lien

If you don’t pay your taxes, the government entity – be it federal, state, or county - can file a tax lien on your home until the tax bill is paid.

What to do if someone files a lien

Simply put, the best way to get a lien removed against your home is to pay the bill, settle the lawsuit or pay the taxes. You can negotiate with the lien holder to have them voluntarily remove the lien. It is in your best interest to have any lien against your home removed as quickly as possible.

If the lien is unjustified, you can ask the court to remove the lien.

To ensure that there is never a lien on your home, make sure you pay your creditors and taxes on time and in full. Don’t avoid the situation if you have mounting debt or can’t pay your bills. Consult an attorney or financial advisor to get some help.