Source: Point 2 Homes —
Understanding How Liens Work
A property lien is a legal claim against a property, allowing the creditor to use it as collateral to collect what they’re owed if the debtor cannot make payments.
Consider this common scenario to better understand how liens work: taking out a loan to finance a purchase. To secure loan repayments for the duration of the contract, the lender will use one of your assets as collateral. In most cases, the chosen asset will be your home. However, if you fail to repay the loan through some unfortunate circumstances, the lender can file a property lien on your home with the local county office. This gives them the legal right to force the sale of the property to recover the amount they’re being owed.
In the U.S and Canada, the most common property liens result from falling back on mortgage payments. Yet homeowners can also be faced with a lien if, for example, they fail to pay taxes and even bills of contractors working on their property.
Types of Liens
Property liens can be split into two main categories: consensual (or voluntary) and non-consensual (involuntary). Let’s take a closer look at each one.