Types of Liens on Personal Property

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A lien is a claim against your property for a debt. A mortgage is a voluntary lien you grant your lender in return for the money to buy the house, for example. If you're in debt, your creditors can also file an involuntary lien not only against your house but personal property -- assets and possessions other than real estate.

IRS Liens

If you don't file an income tax return when you're legally required to, the IRS will compute how much tax you owe and notify you of the amount. You'll be given a deadline to either pay or work out an installment plan; if you don't meet with the IRS, the agency can file a lien on your house or on personal property such as a boat or car. This gives the agency the authority to eventually take the property for sale.

Auto Loan

One common type of lien is an auto lien. When you take out a loan to buy a car, van or other vehicle, you give your lender a lien on the vehicle. If you fail to pay, the lender will repossess the car; "repo men" make a living out of handling that job. When you finally pay off the loan, the lien disappears along with the debt.

Judgment Lien

If you owe someone a debt and can't, or won't pay, your creditor can put a judgment lien on your property. The first step toward doing that is to go to court and get a judge's ruling that you owe money. The creditor can then use that to file a lien with your local government. State law may specify what your creditor can put a lien on; in California, for example, a judgment lien can target equipment and farm products but not an automobile.

Defenses

State and federal laws include statutes of limitation that specify how long a creditor can maintain a lien on your property; if you reach that time limit without the lender taking action to repossess and sell your property, the lien ends. Filing bankruptcy doesn't usually discharge liens, but it will trigger an automatic stay that prevents your creditors from taking action against you: They can't do anything to seize your property until you complete the bankruptcy process.

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