What Are the Different Lien Types?

Paying down any debt that you owe is obviously important. If you don’t take care of debt, it could take a big toll on your credit score.

But that isn’t the only way in which debt might affect you. In some instances, a creditor might also hit you with a lien in an attempt to get you to pay off a debt that you owe to them.

What is a lien? Well, it’s essentially a legal claim that a creditor makes on something you own until you settle a debt with them.

Different creditors will use different lien types. It’s a good idea for you to learn about some of the various lien types just in case you ever have to deal with one.

Find out about a few of the most common types of liens below. Whether you’re a debtor or a creditor, you should be familiar with how each of these liens works.

Tax Liens

Of all the different lien types that we’re going to discuss today, the ones that people are probably the most familiar with are tax liens. These are the types of liens that you’ll have to deal with if you don’t pay your taxes.

Oftentimes, those who get hit with tax liens end up with them because they don’t pay their federal income taxes to the IRS. But you might also encounter a tax lien if you don’t pay your state income taxes, your property taxes, your business taxes, or any other taxes that you might owe.

This type of property lien will get put up against your house in most cases. As a result, you won’t be able to sell your house at any point until you take care of your unpaid taxes.

But the good news is that most people don’t ever have to worry about facing foreclosure due to a tax lien. They will, however, need to make sure that they do something about their overdue tax bill if they ever plan on moving out of their house.

Mortgage Liens

The tax liens that we just described are known as involuntary liens. You don’t have a choice as to whether or not you’re going to get hit with a tax lien. If you don’t pay Uncle Sam, the IRS or another tax organization will come after you and force you to take on a tax lien.

Mortgages liens, on the other hand, are what are known as voluntary liens. They’re voluntary because you agree to take on a mortgage lien when you purchase a home using a mortgage.

The lender that provides you with a mortgage will secure the loan that they give to you with a mortgage lien. This lien will entitle them to seize possession of the home that you’re buying if you ever fail to make payments on it.

With this in mind, you should be sure that you’re prepared to take on a mortgage before actually doing it. You might end up facing foreclosure if you put yourself in a position where you can’t make your monthly mortgage payments.

UCC Liens

The Uniform Commercial Code, or the UCC, is a set of rules and regulations that are used to govern all of the commercial transactions that take place in this country on a regular basis. When one party lends money to another party, they can file a UCC lien with the Secretary of State and claim a piece of property from the borrowing party until they’ve repaid their debt.

You might see, say, a lumber supplier file a UCC lien after giving a contractor a bunch of building supplies on credit. That contractor will then be required to repay the debt that they own to their lumber supplier before reclaiming control of the piece of property that had a lien on it.

Both debtors and creditors should play a part in filing a UCC1 form when a UCC lien is going to be used during a commercial transaction of any kind.

Mechanics Liens

If you happen to work in the construction industry, mechanics liens will be some of the most important liens to you. They’ll be the lien types that you’ll use if you ever do work for a client who then refuses to pay you.

You can file a mechanics lien against the property that you worked on. It’ll just be imperative that you go about doing it in the right way in your specific state so that your mechanics lien is recognized in an official capacity.

Judgment Liens

Have you ever wondered what happens if one party doesn’t pay the other party at the end of a lawsuit? They aren’t allowed to do this and get away with it.

If a judgment is awarded to one party at the conclusion of a lawsuit and the other party doesn’t pay them, there will be a judgment lien put on them. This judgment lien will give the party that was awarded money in a lawsuit the chance to put a lien on a piece of the other party’s property until they receive their money.

You shouldn’t have to be too concerned about dealing with a judgment lien at any time in your life. But it could pose a problem for you if you’re ever involved in a lawsuit that ends up going through the legal process.

What to Do If You’re Hit With One of These Lien Types

If you ever get hit with a lien, it’s not going to be the end of the world. In many cases, all you’ll have to do is figure out a way to repay a small debt that you owe to have a lien removed.

With that being said, each of the lien types listed here works a little bit differently. So you should be prepared to see what you’ll have to do to remove a lien as soon as you find out about one. It should make it slightly easier for you to get a lien removed fast.

Find out more about liens and getting rid of debt by browsing through our other financial blog articles.

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