A lien is a legal right against an asset which ensures payment for a debt. It's used as a guarantee for obligations like loans, giving the creditor the right to the property if the borrower fails to fulfill their duties. The party receiving the lien is the lienor, while the owner of the property is the lienee.
For example, if you take a loan from a bank using your property as collateral and fail to pay back the loan, the bank has the right to take your property.
Liens can be created by court orders or creditors to ensure loan repayment. If the borrower doesn't fulfill their obligation, the lender has the right to seize the asset. Various types of liens exist to protect assets, such as bank, real estate, and tax liens.
Different types of liens exist depending on who created them, like tax authorities, creditors, or court orders.
How do Liens work?
Liens are legal claims against assets used as collateral for a debt. They can be created by court orders or creditors to ensure loan repayment. If the borrower fails to meet their obligation, the creditor can seize the asset. There are different types of liens such as bank, real estate, and tax liens.
Types of Liens
Consensual liens arise from contractual agreements, typically for personal or real estate loans like mortgages or auto loans.
Non-consensual liens can be created by statutes or common law, for example, a tax lien against a taxpayer's property. If taxes go unpaid, the tax authority can seize the taxpayer's property.