Liens and Levies

October 16, 2020
Zachary Bryan

Lending money with no means or intentions to repay is a poor decision—one that conjures up the image of government agents or bank officials knocking on your door, demanding that you repay in full else they seize your belongings. While, hopefully, such a situation never becomes reality, it is important to recognize common transactions, such as entering into a mortgage, purchasing a car, opening a bank account, filing for taxes, or even going to the dry cleaners, can result in legal obligations called liens. Liens can lead to levies, which then may lead to the forfeiture of property.

Liens and levies are serious business, but what are they and what exactly is the difference between the two?
  • A lien is a legal claim on your property by a creditor
  • A levy involves the actual seizure of property

Liens can apply to both businesses and individuals and usually fall into one of two categories: voluntary and non-consensual

Voluntary Liens

Voluntary liens are created when you agree to give the lender a stake in your property as a type of collateral. For example, when you purchase a home and take out a mortgage, you agree that, in the event you fail to certain requirements of the mortgage, the lender can foreclose your home. Likewise, any time an individual or business approaches a bank to ask for a loan, the resulting legal claims by the creditor on your property are also voluntary liens, because you entered into the agreement voluntarily.

Non-consensual Liens

Non-consensual liens usually come in two different types: statutory and judicial. Statutory liens are created by state or federal laws and include the following:

  • Tax Liens: Liens are attached to bank accounts, current and even future assets and thus enables the government to collect if you fail to pay your taxes.
  • Construction Liens: Say you sign an agreement to have a contractor come and work on your property, but after the work is completed you refuse or are unable to pay. Laws exist in which the contractor has certain amounts of claim, or liens, to the value created on your property. Similar liens apply can to unfulfilled obligations with your landlord or mechanic, depending on local laws.

Judicial liens, a type of non-consensual lien, while having basis in state or federal law, can only be granted through court action. For example, garnishment liens are court-ordered liens that are attached to your bank accounts, which is often used to seize your wages until the garnishment is released or your creditor is paid in full. Another example of a judicial lien is a child support lien, which is attached to your property to obtain court ordered, overdue child support payments.

Avoiding Liens and Levies

How can you avoid a levy? Best way to do that is by avoiding liens, which in themselves should not be an issue unless you don’t fulfill an obligation. In general, liens are only removed by the entity that created them. Common steps to eliminate liens include paying off the debt (the routine way to remove the lien), settling (negotiating with the creditor), or disputing (perhaps you believe that the lien is no longer valid). Sumsion Business Law deals with liens and disputes, and has the experience to guide you through the process.


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