Placing a lien on your property usually can occur due to unpaid debt or taxes. When you own real estate, it's normal to have a first lien, or mortgage, on you title. If you take out an equity loan, then you will have two lien holders. When you sell or refinance your house, the current lenders are paid off. If you owe money and have not repaid it, you risk having a lien placed on your property by that creditor. If two people are on your title and only one is in debt, a lien still may be placed on the property that both of you own.
A lien on your title gives the holder payment from your proceeds in a sale of the property. Those carrying the liens are in position by who placed the lien first. The first lien holder will be paid before the ones that came after. Therefore, if you have several liens due to mortgages and creditor judgments, you may not be able to pay them all if you don't receive enough proceeds. However, if you are selling the property, you will be required to clear all of the encumbrances before the transaction can be completed.
When you are behind on your payments, a creditor will attempt to contact you to bring your account current. If you don't pay what you owe, then the creditor can take you to court to receive a judgment against you. A lien cannot be placed on your property until the court has made its ruling. Then the creditor files the judgment with the country recorder and the lien is placed on your title to be satisfied when you sell or refinance the property. A federal tax lien is handled differently than a creditor lien. The Internal Revenue Service will send you a notice with the amount that you are required to pay the government. You have 10 days to pay the income tax debt before a lien can be placed on your title.
Jointly Owned Property
A jointly owned property may list the title holders as joint tenants, tenants in common or community property. If one of the joint tenants is in debt, a lien may be placed on the property and will be valid until the sale or death of the debtor. When the title holder in debt dies, then the other joint tenant automatically inherits the property without the creditor lien. As tenants in common or community property, a lien placed on the title will transfer to a new owner, due to death, gifting or some other reason.
If you transfer your property by using a quitclaim deed or other method, your lien will remain on the title to be cleared by the new owner. If this occurs, make sure that the person on the title is aware of the encumbrance. If you file bankruptcy, depending on the type that you file and the laws in your state, the lien and your debt can be eliminated by the bankruptcy discharge.