Wondering if there is a lien on your property causes worry and stress. If you are being hounded by collection agents or the federal government for nonpayment of bills or taxes, you might be concerned that they can take your house to repay the amount that you owe. In most cases, you must be notified before a lien is placed on your property.
A lien on your home's title is a claim placed against it by someone to whom you owe money. It is common to have a mortgage lien when you purchase a property. If you don't pay your loan, the lender can take your house for repayment of your debt. However, other unpaid creditors may place liens on your home, too. When you sell or refinance your home, the lien holders must be paid before you receive any money from it. In some cases, you might have to settle your liens before you close a sale. If you don't have enough equity in your home to pay your liens, you can be prevented from selling it.
When you don't pay a creditor, such as a credit card company, a collection agent will attempt to force you to pay what you owe. If you don't, the creditor can sue you in court and win a judgment against you. First, you will be notified of the court date and given an opportunity to defend yourself. To collect a judgment, the creditor can garnish your bank account or wages. Another option is to place a lien on your home. This is not always desirable because your creditor will not be repaid until you sell the home and any liens placed before are satisfied.
A mechanic's lien is one placed by a contractor, subcontractor or other construction person you hired to work on your home. These liens are fairly simple to apply, but each state has its own rules on notification and placement. Most states require that the homeowner is notified in some way that a lien is being placed on the property. Sometimes, even if you have paid your contractor, you can find a lien threatening your title from subcontractors who still are owed by the contractor.
If you owe the Internal Revenue Service money for an income tax bill, and you don't pay it, you can find a tax lien placed on the title of your home. However, you will be notified first. The IRS usually sends you one to four letters demanding that you pay the amount owed, plus any interest and penalties. You don't have to receive the notices before your house is attached for payment. If you collect your mail at another address or you moved out of the house that you own, you might not have knowledge of the impending tax lien.
- The Money Alert: What Is A Lien?
- Bankruptcy Law Network; What Does It Mean to Have Judgment Filed Against You; Jonathan Ginsberg; 2011
- National Lien Law: Mechanics Lien Law
- Back Taxes Help: IRS Federal Tax Lien - Definition, Effects, & What To Do
- Internal Revenue Service: Notice of Federal Tax Lien
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.