If you have a lien on your business’ property or assets, you’re likely concerned about the legal ramifications of failing to pay a debt. In this article, we will explain the types of liens that may affect your business and what they mean for your property and assets.

What is a Lien?

A lien is a legal claim against either a business’ property or assets. This allows a lender, or lien holder, to either take control of or take legal action to settle any debts on the property or assets. This creates a security interest in your business property until the lien is released.

For example, if you purchase a vehicle for your business using a loan from the bank, the bank places a lien on that car and holds the title. If you fail to make payments, the bank can sell the vehicle to recover the debt. Once the loan is repaid, the lien is removed, and you become the rightful owner.

However, if you fail to pay, the lien holder retains the title and can sell the asset to someone else.

Types of Liens: An Overview for Business Owners

There are three main types of liens: consensual, statutory, and judgment liens.

1. Consensual Liens

These are voluntary liens created when you pledge property as collateral for a loan.

• Purchase-Money Security Interest Liens: These arise when you buy property with borrowed funds, such as a mortgage or equipment loan.
• Non-Purchase-Money Security Interest Liens: These occur when you use existing property as collateral, like refinancing a mortgage.

Most consensual liens are non-possessory, meaning you keep possession of the property. In a possessory lien (like a pawnshop loan), the lender holds the property until repayment.

2. Statutory Liens

State or federal law creates these involuntary liens. Creditors and government agencies use them to collect unpaid debts.

• Mechanic’s Lien: Contractors or suppliers can place this lien if they aren’t paid for work or materials. It can delay property sales until resolved.
• Tax Lien: Local, state, or federal authorities can file tax liens for unpaid property, income, or estate taxes.

3. Judgment Liens

Courts create judgment liens after lawsuits. If you lose a case and don’t pay the damages, the winning party can place a lien on your property. Creditors may also garnish wages or seize bank accounts to satisfy the judgment.debt remains unpaid, creditors can garnish wages, seize bank accounts, or place a lien against your property.

How to Address Different Types of Liens

Understanding the types of liens that may affect your business is crucial for managing debt and protecting your assets. Whether the lien is consensual, statutory, or judgment-based, it’s important to address the debt promptly to avoid legal complications or asset loss.

If you are concerned about liens or need assistance resolving them, consult an experienced business attorney to protect your interests and secure your business assets.

Get Help Managing Different Types of Liens

If your business is facing challenges related to any types of liens, the legal team at Boyer Law Firm, P.L., can provide guidance. We have experience helping business owners understand, manage, and resolve liens to protect their property and financial interests.

Contact us today for a consultation and let us help you navigate the complexities of liens affecting your business.