How Are Liens Filed?
Liens and judgments are both indicators of unpaid debts. First off, what is a lien? A lien is a legal claim that an individual or entity has over you. Meaning they could repossess or foreclose your property to get the money they are owed. Before you start worrying, repossessing only happens when you stop making payments. Or no longer follow the agreed-upon terms of the associated loan. Liens typically stay in place until the debt in question is paid off. There’s no getting around this type of agreement.
Liens are public records, therefore, must be filed with various government agencies. Most commonly in a county records office, especially when you’re dealing with property. There are different types of liens, meaning various processes of filing them. No matter what type you’re dealing with, you must pay a filing fee. Since a lien is a public declaration of unpaid debts, make sure you are ready to follow through with it. You should try making a deal with the other person before making it a legal matter.
Where Do They Come From?
- Home Loans
- Auto Loans
- Tax Liens
- Judgment Liens
- Construction Liens
Home Loans – When someone borrows money to purchase a home, the property is now collateral. If you don’t meet requirements with monthly payments, the lender will be able to foreclose your home.
Auto Loans – Similarly to home loans, your property is taken from you. The auto lender could repossess your vehicle if you’re not making monthly payments. These types of loans can result in liens.
Tax Liens – Unpaid taxes can be collected by the IRS or local government through liens. This is very concerning as these types of liens stay on your public record. Therefore, could be linked to current and future assets.
Judgment Liens – If you’re involved in a lawsuit and owe money, the individual can file a lien against you. This way, the person can collect property you own if you can’t pay out of pocket.
Construction Liens – If you have construction work done, then you’re required to pay the contractor for the service. If the person who performed the work isn’t paid, they can file a mechanic’s lien.
How Are Liens Removed?
There are four main ways to remove a lien against you. Remember, liens must be removed by the individual or entity that created them. First, try to settle and negotiate a fair deal between the two of you. If negotiating doesn’t work, the easiest way to remove it is to just pay off the lien and be done with it. However, if you think the lien was put on you unjustly, you can dispute it or get it corrected. The lien may not be considered legitimate to you, contact the lienholder. Talking to the right person or just plain luck could lead it to be forgotten. You could attempt to dispute it even though this is a difficult method. For this process, you need to take legal action and have the claim evaluated.
Can Liens Be Negotiated?
A lien filed against you should always be taken seriously and is public information. Your best bet is to attempt to negotiate a payment plan before it goes to court. For legal advice, you could speak to a business or tax attorney about your situation. They will also evaluate your claim and if the lien is legitimate or not. Also, reach out to the person who wants to file the lien against you. The person is probably angry with you, so talking to them calmly could diffuse the situation. Be honest about your financial situation and struggles and figure out a long-term payment plan. If that doesn’t work out, then it can be taken to court.
How Do Liens Affect Credit Scores?
In terms of credit history, a lien would fall under the payment history category. A lien is the result of unpaid debts which can affect your credit score. This type of action falls between late payments on a credit card and declaring bankruptcy. All of these are negative marks on your credit history. If you have a lien on your house, it would make it nearly impossible to get approved for a home equity loan or sell your property. Also, having no negative marks on your credit report means your credit score will take an even bigger hit from a lien.
Can Liens Accrue Interest?
Anytime a payment is delayed, there will be some form of interest. Since a lien is a payment owed, it is no surprise that it does accrue interest. Until a lien is completely paid off, it will continue to accrue interest. The reasoning for this is that it compensates the lien holder for the wait. Knowing this should give you an incentive to pay it off and not delay the payment. You can find out the statutory increase in the state that the lien is filed. The idea of having a lien filed against you sounds overwhelming, but there are ways to work it out. Make sure to find some sound legal advice before making any big moves.
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