For the most part, whether a lien is a "property lien" or a "judgment lien" depends on how the creditor got the lien. Creditors typically acquire property liens through your voluntary consent. On the other hand, creditors get judgment liens after winning a lawsuit against you for a debt you owe.
When you take out a loan to buy a house, you sign a contract (a "promissory note") promising to repay that debt. Because the amount of money you borrow is so large, the creditor requires something to help minimize the financial risk it takes when it lends you this money. The creditor accomplishes this by making the offer to finance the property's purchase conditional on you giving it a lien on that property.
Most borrowers sign a mortgage or deed of trust to provide the creditor with a lien. Once the creditor has a lien and you default on the terms of the agreement—for example, you don't make the mortgage payments—the creditor may take action to foreclose on the property you pledged as a security interest.
State law typically requires the creditor to "perfect" the property lien by recording it, usually in the county records. This recording requirement gives other parties of interest notice of the lien. The creditor must remove the lien once you fully pay the corresponding debt.
A creditor gets a judgment lien by winning a lawsuit against you, like if you don't pay a credit card debt. While creditors have numerous options to collect on a debt, creditors often use judgment liens as the primary way to ensure you pay the debt off.
The creditor first obtains a judgment against you. The creditor then usually records the lien in the county where you or the property resides and attaches the judgment as proof of the creditor's entitlement to the lien.
Generally, you'll need to get the lien removed or released before you can sell, refinance, or transfer the property.
If a creditor places a lien on your home, your property becomes collateral for the debt, whether the lien is a property lien or a judgment lien. So, the lienholder could foreclose if you don't pay the balance associated with the lien.
However, while lienholders generally have the right to foreclose, they usually don't. Mortgage lienholders and tax lienholders are an exception to this general rule. Instead, the lienor will probably just be patient and wait until you sell the property or refinance while interest accrues on the debt.
To sell or refinance the property, you must have clear title (a property free of liens). A lien on your house encumbers your title. You must remove the outstanding liens to clear up the property's title.
Here are some ways to remove a lien from your property.
If you pay off the underlying debt, the creditor will agree to release the lien. The creditor then files a release with the same authority with which it recorded the original lien. (The filed release takes the lien off the property.)
Once the creditor releases the lien, you may sell, trade, or otherwise transfer the property.
If a creditor puts a lien on your property, you may make an offer to settle the amount for less than you owe. As part of the negotiations, get the creditor to release the lien.
Consider hiring a debt settlement lawyer to help you if you need help in the negotiations.
Most states provide a process by which you can ask a court to remove a judgment lien. But whether the court will approve your request depends on the nature of the property burdened by the lien.
If you think the creditor got the lien through fraud, bad faith, coercion, or other wrongful means, you might be able to win a lawsuit against the lienor. If you win the case, the court can order that the lien be stricken from the property records.
You can also ask a court to remove a lien if the debt is valid but the lienor didn't follow proper legal procedures when filing the lien. Some kinds of liens, such as mechanic's liens, must be filed by a specific deadline. If the contractor misses the deadline, you can petition a court to have the lien removed from the property records. Or you might be able to get the lien removed if the contractor doesn't serve you with a copy of the lien. Courts strictly enforce deadline and service requirements.
A lawsuit to remove a property lien can be expensive and complicated. If you want to file a lawsuit against a lienor, contact a real estate lawyer to help you.
If a specific amount of time passes, the lien will expire. The statute of limitations for a lien varies depending on the type of lien and state law.
But be aware that state law often allows lienors to renew their lien.
By filing for bankruptcy, you might be able to eliminate particular liens through "lien avoidance" or "lien stripping." You should only use this option as a last resort unless you have other debts that necessitate filing bankruptcy.
Talk to a bankruptcy attorney for more information about removing liens through bankruptcy.