What Debtors Can Expect From Liens
Liens are a topic often brought up in bankruptcy court, and yet many debtors do not truly understand what the term means. Essentially, liens are a claim a secured creditor can hold against an asset belonging to a debtor, because the entity holds a particular interest in that asset. For instance, if a loan is obtained for the sole purpose of purchasing a vehicle, that creditor would have a lien on the vehicle and hold its title until the loan was paid in full. Unsecured creditors, on the other hand, do not have claims on the property of debtors.
Failure to stay current with loan payments in which the creditor holds a lein can ultimately lead to seizure of assets by the creditor. Therefore, hiring a South Florida bankruptcy lawyer is crucial if it becomes evident that one will no longer be able to make payments, and thus be headed for bankruptcy.
Additionally, having a basic understanding of the various types of liens and the legal implications associated with each one is beneficial for debtors. Our team introduces the most common types of liens below.
Consensual Liens — These leins are voluntarily agreed upon by a debtor when a loan is initially taken out. The property purchased by the loan or used as collateral secures the debtor’s obligation to repay his debt. Both the consensual liens below are usually non-possessory, which means they do not facilitate the confiscation of a debtor’s property by creditors.
Purchase-Money Security Interest Liens — Type of consensual liens agreed to when a creditor provides a loan that will be used by the debtor in the purchase of property. Commonly used to secure a first mortgage on residential property or a car loan.
Non-Purchase-Money Security Interest Liens — These liens are placed on assets when a debtor takes out a loan and puts up property he already owns as collateral. Often, the loan is used to pay off expenses or other debts. Usually used to secure a second mortgage on a home or a loan used to pay a business’s operating expenses.
Statutory Liens — Statutory liens are liens that place a claim on assets for unpaid bills and are obtained through a court process using state or federal laws. Below are two types of statutory liens, both of which can prevent debtors from obtaining a property’s title and selling said property.
Mechanic’s Liens — If a mechanic or contractor repairs a property and is not paid, the contractor can place a mechanic’s lien on the property. These types of liens will ensure that debt is paid off. If the lien is placed on property, such as a home or car, then the property owner will not be able to sell said property until the debt he owes is paid off.
Tax Liens — These types of liens are placed against the property of someone who has failed to pay his tax debt. If delinquent property taxes are involved, the municipal government will likely place a lien on the debtor’s property. The state and federal government will place a lien if the debtor owes income taxes.
Judgement Liens — These liens result when the court awards a lender a judgement regarding the repayment of debts by a debtor. If the debtor cannot afford the judgement and the debt remains unpaid, the lender can enforce the judgement. This usually means garnishing the debtor’s wages, seizing his bank account, or placing a judgement lien against his property. A judgement lien is the first step creditors take toward taking ownership of the debtor’s property and selling it to satisfy the debt.
Are you trying to manage your debts to avoid bankruptcy? Do you want to fight a judgement lien made against your property? Are you trying to prevent the confiscation of your assets? Seek out an experienced South Florida bankruptcy lawyer.
Our team at Kelley Kaplan & Eller not only represents our clients in bankruptcy cases, but are experienced at helping them avoid bankruptcy and protect their assets.
What Debtors Can Expect From Liens
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