Lien definition
/What is a Lien?
A lien is a legal claim against an asset that is not cleared until an associated debt is paid. A lien is filed by a creditor, usually in situations where the asset is in the possession of the debtor. The debtor cannot sell the asset until the lien has been cleared, which provides leverage by the creditor over the debtor.
Types of Liens
There are several types of liens. One is the bank lien, where a debtor uses an asset as collateral on a loan; the lender files a lien on the asset with the applicable government entity, and releases the lien when the loan is fully paid. Another option is the judgment lien, where a lien is imposed on assets by a court as part of a legal judgment against a defendant. Yet another type is the mechanic’s lien, where a contractor imposes a lien on property when the property owner does not pay the contractor’s bill for services rendered. In addition, a tax lien is imposed by a government when a taxpayer refuses to pay a tax bill.