What Is A Lien?
A lien refers to the right of a creditor to assume ownership of a debtor’s property as security until a debt or duty is discharged. Essentially, it is a claim or a legal right to take over assets used as collateral to satisfy a debt.
A lien can be established by a creditor, a legal judgment, or a tax authority. Its primary role is to secure and make sure that an obligation is met, e.g., the repayment of a loan.
In a case where the said obligation is not satisfied, the creditor is legally permitted to seize the asset that is the subject of the lien, that is, the collateral.
Virtually all transactions for which a consumer of a good or recipient of a service fails to, or is unable to pay, may lead to a lien.
A lien provides a creditor with legal rights to seize and sell off any property that has been staked as collateral by the borrower, especially if they fail to meet the obligations of the loan or contract. Any such property made collateral security cannot be leased or sold without the holder of the lien’s consent.
The public record of a lien reveals to anyone interested in purchasing that the lien must be released before the asset can be sold. In a case where payments owed are not duly paid, the lienholder is well within their rights to seize property as a security for the payment.
Hoteliers, attorneys, and so on may choose to hold on to property brought into their facilities or documents, including title deeds that may be in their possession as the case may be. Any form of defaults on payments, including spousal support, payments due to contractors, and so on, can force the aggrieved party to request that a lien be placed on the defaulter’s property.
Suppose a particular individual, Ray, agrees with a friend, Roy, to rent a fishing boat for a full day and fails to meet up with the payment of the bill at the stipulated time. In that case, Ray could be charged to court, and if he loses the lawsuit, Roy could be allowed to seize Ray’s property if payment is not made within a reasonable time.« Back to Glossary Index