DEFINITION of 'Non-Possessory Lien'

The legal claim against an asset in order to secure payment of the debtor's obligation. In a non-possessory lien the lienor does not hold physical possession of the asset in question, only a legal right. For example, a creditor can place a non-possessory lien against a debtor's piece of real estate in order to recoup his/her loan amount once the property is sold.

BREAKING DOWN 'Non-Possessory Lien'

For example, pawn shops retain possession of an item that a customer uses as collateral for a short-term loan. The pawn store owner therefore retains a possessory lien; if the customer does not repay the loan according to the terms and conditions s/he agreed to, the store owner can take ownership of the item offered as collateral.

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