When someone has a lien on your property, they have a legal claim to either the entire property or a certain amount of equity in that property.
Generally, there are two kinds of liens:
- Voluntary liens. Also called property liens, voluntary liens establish your property as collateral when you sign the loan agreement. For example, when you take out a mortgage, the lender becomes a lienholder, which means they can seize and sell the collateral (your home) through foreclosure if you fall behind on payments. This is very similar to automobile loans, in which the lender can repossess your car if you stop paying them.
- Involuntary liens. Also called judgment liens, involuntary liens typically result from lawsuits. An unsecured creditor (like a credit card company or debt collection agency) may sue you if you fail to pay what you owe. If they succeed, the court may grant them a judgment lien in the amount of your debt. If you owe them $5,000, for example, they may place a $5,000 lien on your home. In the event of a sale (which they may be able to force), they will be entitled to $5,000 of the sale proceeds. Keep in mind that the IRS can place a tax lien on your home without filing a lawsuit against you first.
So, how might you remove either a property lien or judgment lien from your house? Here are a few different options you may have at your disposal.
Pay Off the Lien
Is the lienholder giving you time to make payments toward the debt? If you have the necessary funds, paying off the debt will be the easiest and safest method of removing the lien. Once the debt is paid, the lender can officially release the lien.
Negotiate a Settlement
Negotiating with a lienholder can be challenging, which is why you will greatly benefit from the advocacy of an experienced attorney. They may be able to help you settle your debt for less than what you owe.
Fight the Lien in Court
Is the lien invalid because you don’t owe the debt? You may be able to cancel the lien by submitting proof that you don’t owe the debt. This may require a lawsuit, however. Furthermore, your likelihood of success will be minimal if the lien resulted from a court judgment. Courts generally must respect the rulings of other courts, which is why you will almost never be able to overturn a judgment lien through additional litigation.
If, therefore, you believe a creditor or collection agency is coming after you for debt you don’t owe, proactiveness is key. You must prove your lack of liability before they obtain a court judgment against you.
If you don’t have the funds to pay the lien, and this debt is just a small portion of all the money you owe to other creditors and lenders, you may consider filing bankruptcy.
Chapter 7 is particularly useful for lien avoidance, which is when the court strips the lien off of your property and discharges the debt. If the lien you want to remove is from a second and/or third mortgage, you may benefit from Chapter 13. Both paths have very specific requirements, however, and you will want to consult with an attorney before assuming that either chapter will remove a lien from your property.
Let’s Discuss All Your Debt-Relief Options
The above information is intended as general guidance, and your unique situation will require the expertise and insight of a highly experienced lawyer. At Buchalter & Pelphrey Attorneys At Law, our legal team provides services backed by 45+ years of experience. We know the ins and outs of bankruptcy law, the removal of liens, and many other debt-related issues. If you need relief from unmanageable debt and relentless collection agencies, let’s go over your options today.