Reviewed by Sujaini | Updated on Jul 30, 2021


What is a Lien?

A lien is a judgment or legal right in respect of properties that are usually used as collateral to pay a debt. A creditor or a legal opinion may create a lien. A lien helps to protect an underlying obligation, such as repaying a loan. When the underlying duty is not fulfilled, the lender will be entitled to seize the asset, which is the subject of the lien. Most forms of liens are used to protect properties.

How it Works?

A lien gives a creditor the legal right to seize and sell a borrower's collateral property or asset which fails to fulfil a loan or contract obligations. The owner cannot sell the property that is the subject of a lien without the permission of the lien holder. A floating lien refers to an inventory lien or some other unfixed capital.

Liens may be contractual or mutual, like a lien on a loan on the house. There are also contractual or statutory obligations, however, that a borrower takes legal recourse for non-payment, resulting in a lien being imposed on assets, such as property and bank accounts.

Certainties are registered with the government to let the public know that the lienholder has an interest in the asset or property. The public record of a lien shows someone interested in purchasing the asset or collateral that the lien has to be released before the asset can be sold.

Types of Liens

There are several styles of liaisons and holders of lien. Financial companies, governments, and small businesses should set up links. These are some of the most commonly used ties.

  • Bank Lien
  • Judgment Lien
  • Mechanic's Lien
  • Real Estate Lien
  • Tax Lien

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