Lien

AAA

DEFINITION of 'Lien'

The legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract. A lien exists, for example, when an individual takes out an automobile loan. The lien holder is the bank that grants the loan, and the lien is released when the loan is paid in full. Another type of lien is a mechanic's lien, which can be attached to real property if the property owner fails to pay a contractor for services rendered. If the debtor never pays, the property can be auctioned off to pay the lien holder.

INVESTOPEDIA EXPLAINS 'Lien'

Liens are typically enforced under provincial or state laws, with the exception of federal tax liens. When a taxpayer becomes delinquent and shows no indication of paying, the IRS may place a legal claim against a taxpayer's property, including his or her home, vehicle and bank accounts. A federal tax lien has precedence over all other creditors' claims. It also affects the taxpayer's ability to sell existing assets and to obtain credit. The only way to release a federal tax lien is to fully pay the tax owed or to reach a settlement with the IRS. The IRS can seize the assets of a taxpayer who ignores a tax lien.

RELATED TERMS
  1. Corporate Lien

    A claim made against a business for outstanding debt. The debt ...
  2. Construction Lien

    A claim made against a property by a contractor or other professional ...
  3. Silent Automatic Lien

    A lien that does not appear in any public record. This is a method ...
  4. Clear Title

    Also known as "clean title," "just title," "good title" and "free ...
  5. Forfeiture

    The loss of any property without compensation as a result of ...
  6. Blanket Lien

    A lien that gives the right to seize, in the event of nonpayment, ...
RELATED FAQS
  1. How do I file a proof of claim against someone who has filed bankruptcy?

    When someone who owes you money has filed bankruptcy, and you have been listed as a creditor in the filing, you are legally ... Read Full Answer >>
  2. What kinds of financial instruments are designated as “Securities” by Cabinet Order?

    In Japan, securities are regulated by the Diet and the Financial Services Agency, or FSA. Rulings about securities come down ... Read Full Answer >>
  3. What's the difference between cash-on-delivery differ and delivery against payment?

    Cash on delivery and delivery versus payment describe different procedures and timing of payments. Cash on delivery describes ... Read Full Answer >>
  4. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
  5. Why is it beneficial to innovate financial models and techniques used in quantitative ...

    The majority of consumers use credit cards at some point during their lifetimes to finance major purchases, earn rewards ... Read Full Answer >>
  6. How can I use quantitative analysis to evaluate investment decisions if I don't have ...

    While there are a few legitimate companies advertising that they can consolidate credit card debt, most are illegitimate ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Attention Home Buyers! Why You Need A Lawyer

    Property transactions are complex and subject to specific state/local rules. A professional can simplify the process.
  2. Brokers

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  3. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  4. Retirement

    The Indiana Jones Guide To Getting Ahead

    Follow Indy's advice to conquer the obstacles blocking your path to financial well-being.
  5. Home & Auto

    Swimming Pools: Costs Vs. Long-Term Value

    Consider the costs of installing and maintaining a swimming pool, and compare this with the pool's utility and the market value it adds to your home.
  6. Credit & Loans

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  7. Home & Auto

    Add Extra Appeal, and Market Value, To Your Yard

    Spring landscaping projects are worthwhile because, in addition to bringing more appeal to your yard, they'll increase the resale value of your home.
  8. Economics

    Venezuela Teeters On Edge As Oil Revenues Shrink

    Low oil prices have drastically revised the economic status quo -- dealing a destabilizing blow to oil-exporters like Venezuela due to falling oil revenue.
  9. Home & Auto

    Strategic Bathroom Enhancements With Huge Returns

    Even modest investments to improve a small bathroom can yield considerable rewards.
  10. Economics

    Does A Junk Rating Reflect Russia's Fundamentals?

    Moody’s, like other credit rating agencies, has downgraded Russia’s sovereign debt rating to non-investment grade, but does this reflect Russia's economy?

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center