About Filing a Lien

Collecting debt can be frustrating for creditors, especially in the case of non-paying debtors. One option for collecting monies owed you is to file a lien against property owned by the debtor. This option is best used when you've exhausted other measures since it's complicated and can become expensive, even for the creditor, due to legal fees and time required to complete the process.

Function

A lien gives a creditor a legal hold over the debtor's property, making it collateral for debt owed to the creditor. It's often used for second mortgages, where the creditor places a lien on the home as collateral for the loan. It can also be used for loans against car titles, and some people offer other high dollar items as collateral for large loans. A lien prevents the owner from selling or transferring the title of the property during the time the lien is in effect.

Time Frame

Before filing a lien, go to civil court in order to get a judgment to confirm that the creditor owes the money. Give them up to six months to pay the judgment. After the fifth month, send a certified letter expressing your intention to place a lien against property if the debt is not satisfied. If you don't receive payment by the sixth month, it's time to consider placing the lien.

Considerations

Once you've made the decision to file a lien, you'll need to return to civil court. The judge will need to hold the defendant in contempt of court orders for non-payment, and will order a disclosure of assets. This tells you which properties the defendant owns. Then you can begin the process of filing a lien against property to satisfy the debt. At this point, a non-compliant debtor will encounter serious consequences from the court.

Effects

You will need to go to the county in which the debtor owns the property in order to file the lien. First, register your civil court judgment with the appropriate land records office. Depending on the county, this may automatically create the lien, but to be safe, check the county's laws. Many creditors choose to hire a lawyer for this process as it can become incredibly complicated and time consuming.

Warning

Filing a lien doesn't guarantee that you'll receive payment in a timely fashion, if at all. The debtor must sell or refinance the property in order to satisfy the debt, but may leave the lien on the title and ignore the debt. If he dies before the debt is paid, property is distributed according to his will. While the lien is attached to the title, the recipient of the property isn't required to satisfy it and may legally keep the property without satisfying the lien.