A general lien is against all the property owned by a debtor, even though all of the property might be worth more than the amount the debtor owes. This is different from a specific lien, which is against a specific piece of property. A typical home mortgage or car loan is an example of a specific lien. In a specific lien, the specific piece of property alone satisfies the debt; the lien does not attach to other property owned by the debtor.
In a general lien, money owed might come from the sale of the car, house and other property owned by the debtor. Reviewing general lien vs. specific lien basics will help you understand your situation if you are in this predicament. It will also help you look at contracts to see what types of liens they might include, and help you avoid entering into contracts based on this.
What Are Liens?
A lien gives a creditor the right to recoup a debt through the proceeds from a sale of property, explains the IRS. A lien is a claim against property, often used to secure a loan. The lien represents the lien holder’s interest in the property, not ownership.
The lien gives the lien holder the legal right to compel payment, according to state laws. The general lien affects all personal and real property owned by the debtor.
General vs. Specific Liens
What does a specific lien mean vs. a general lien? If you are sued, the judgment against you might be against all of your assets, until the judgment is paid. This makes it a general lien, explains the Oklahoma Senate. Yet, if the debt is for a car loan, the repossession of the car alone is typically sufficient to satisfy the loan, even if the lender is not able to resell the car for enough to satisfy the initial debt, thus making it a specific lien.
Legal Action Regarding Liens
To force the sale of the debtor’s property to repay the debt, the lien holder typically needs to introduce legal action. A lien does not necessarily restrict the debtor from selling the property, yet it can determine what happens to the funds after the sale. Unlike liens against real property, which attach to the property when filed, liens against personal property attach to the property after seizing the property.
Voluntary and Involuntary Liens
There are different types of specific liens, which include voluntary and involuntary. A voluntary lien is one the borrower establishes, such as a car loan or home loan, while an involuntary lien is not something the debtor chooses.
Laws such as tax laws or court rulings create involuntary liens. Unlike the specific lien, which can be created either voluntarily or involuntarily, general liens are just created involuntarily.
Equitable vs. Statutory Lien
A lien might be a statutory lien or an equitable lien. A statute creates a statutory lien, such as a property tax or income tax lien. If you fail to pay those, a government entity (which could be a local or state government, as well as the federal government or one of its agencies), can place a lien against your assets. An equitable lien has its roots in common loan. Court action creates an equitable lien, theoretically created out of fairness.
Ann Johnson has been a freelance writer since 1995. She previously served as the editor of a community magazine in Southern California and was also an active real-estate agent, specializing in commercial and residential properties. She has a Bachelor of Arts in communications from California State University, Fullerton.