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Main Dictionary L


Term lien refers to the right of a lienholder to satisfy a debt with the sell of pledger’s assets. It serves as a vow of a pledger to meet obligations of a contract. In case of a pledger not being able to fulfill the obligation, a lienholder is empowered to seize the asset subjected to the lien in order to pay the loan.

Lien explained

As can be seen from the definition itself, withholding does not require any special agreement or documentation. The behavior of a creditor who withholds property is passive, and his right with respect to the debtor in this case is that he has the right to refuse both to transfer the property to the debtor and to a third person at the direction of the debtor.

Lien is property that serves as security for a borrower's obligations under a loan or credit. The person who provides the collateral is called the pledger. The person who accepts the collateral is called the pledgee.

Any liquid property of the borrower can be used as a lien, most commonly a car, real estate, or securities. The owner's consent is required when it is presented.

For the duration of the debt, the lien will be encumbered, which limits operations with it. For example, you will not be able to sell or donate it without the consent of the mortgagee. If the borrower fails to satisfy the debt on time, the lender can foreclose on the collateral for later sale.

With help of the lien, the lienholder is entitled to seize or sell property or other assets of the pledger to retire the indebtedness of the second. When pledging the property, its owner has no longer the right to sell it without the lienholder's permission.

A lien can be voluntary or consensual. Consensual lien is chosen by the pledger to obtain a property loan. However, there are also legitimate liens where the lender goes to court for delinquency. Proportionately, lien is imposed on all of the pledger’s assets, including real estate and bank accounts.

Some liens are publically accessible and filed with the administration. This is made in order to let the public be aware of the holder being entitled to seize the asset or property. A public record of the lien allows anybody interested in buying the asset or lien that the lien must be repaid before the asset can be sold.

The subject of a pledge may be any property, including property rights, with the exception of property excluded from turnover, claims inseparably linked with the identity of the creditor, in particular claims for child support money, compensation for injury caused to life or health and other rights, the assignment of which to another person is prohibited by law.

Pledge of immovable property (land, businesses, buildings, apartments, etc.) is called a mortgage.

Where goods in turnover are pledged, the pledgor has the right to change their form, but on the condition that their total value does not become less than that specified in the agreement.

The mortgagor or the pledgee, depending on which of them has the property, shall be obliged to insure it against risks.

Classification of Lien

There are multiple types of liens and pledgees. There are following types of lien:

  • bank;
  • judgment;
  • mechanic;
  • real estate.

Bank lien. Bank lien occurs when an individual takes out a bank loan for purchase of the asset. When a person needs to buy something he/she doesn't have enough money for, there is a possibility to borrow some money from the bank and raise a loan. In case of not repaying a loan, the bank is empowered to seize the borrower’s bought property to cover the loan. When the pledger repays the loan, then the bank releases the seized property.

Judgment lien. It is a court-imposed lien on assets that usually arises out of a lawsuit. A court bond can help a defendant get compensation if he or she fails to pay a debt by liquidating the defendant's assets.

Mechanic's lien. This lien type can be imposed on real property if the ordering customer does not cover costs of the contractor for services. If the customer does not pay, the contractor can go to court and obtain a judgment against the nonpayer, whereby the property or assets can be  sent to the auction for debt payment. Many service providers have the ability to establish a lien to secure settlement. 

Real estate lien. This type entitles to seize and sell real estate belongings in the event of failure of repayment. Some of the immovables liens are set unconsciously, for example, mortgage. When a person appropriates money from a bank to buy immovables, the bank puts a lien on the possessions until the mortgage is fully paid off.

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