The simplest definition for a lien, regardless of industry, is a claim made against specific property owned by you. It serves as a way to prevent the owner from selling without paying off the lien, and enables the lien holder to sell your property to pay the lien with or without your consent. There are many different types of liens, all which serve the same purpose: to be paid on a debt owed by securing a property against the debt. All liens must be settled once attached to property. A lien can also affect your credit rating.

The simplest definition for a lien, regardless of industry, is a claim made against specific property owned by you. It serves as a way to prevent the owner from selling without paying off the lien, and enables the lien holder to sell your property to pay the lien with or without your consent. There are many different types of liens, all which serve the same purpose: to be paid on a debt owed by securing a property against the debt. All liens must be settled once attached to property. A lien can also affect your credit rating.

Consensual Liens

Consensual liens are the most common type of lien, with both parties agreeing to the placement of the lien. These liens can be "purchase-money liens," such as a first mortgage where the owner of the home agrees to the bank securing the home with a lien should the debt go unpaid. A car loan is a consensual lien, secured by possession of the car in the case of default.

The second type of liens in this category is "non-purchase money liens" where the owner of property offers collateral of the property in exchange for a loan. Some examples are a second mortgage, home equity loan or business loans secured by equipment or property.

Statutory Liens

Statutory liens consist of two types: mechanic's lien and tax liens. Mechanic liens are also known as contractor liens, where a service or material has been provided to you and the provider is now owed payment. A tax lien places a lien for owed taxes to the IRS or state and can be the most daunting of all. The lien is not just placed on one property, but on all property you own (including your car), as well as all your rights to any property, including accounts receivables. Federal liens extend to your future purchases as well as current property until the lien is paid off in full.

Judgment Liens

Also called judicial liens, this type of lien is when a court has granted a creditor actual rights to property owned by the debtor. Once the monetary judgment has been granted, the creditor can attach a lien on real property, seize bank accounts or even garnish wages. If not settled, this lien can force the sale of property to satisfy the debt. Some examples are lawsuits where negligence is involved, and the court awards the plaintiff; the defendant's property can have a judgment lien placed until the amount awarded is paid.