What is a Lien? And What does "Perfect" mean?

What Are Liens and Why Do Creditors Need Them?

A "lien" is defined as "[a] legal right or interest that a creditor has in another's property, lasting usually until a debt or duty that it secures is satisfied." Black's Law Dictionary, 8th Edition.

Examples of Liens: Protecting Creditors' Interests

The most classic example of a lien is a mortgage. A person borrows money from the bank to buy a house and the bank takes a lien on the house until the loan is paid in full. Liens are great ways for creditors to feel safe that the money they lend will be paid back. Liens can be taken on different types of things. Examples include a lien on inventory, motor vehicle, bank accounts, investment accounts, or motor home. A creditor rights attorney would be beneficial to a creditor in drafting a security agreement to make sure in the case of default, the creditor does not have to write the lien off as a total loss.

Securing Debt: The Role of a Creditor Rights Attorney

Liens are often referred to as security. In the event of default, the property on which the lien is placed can be taken by the process of law to pay the debt. Default on a loan is defined within the loan document itself. Often people think of default only as non-payment of a debt, but it can be something else. Regularly car loans require the debtor to carry a specific amount of insurance. If the debtor fails to carry the required insurance this may be considered a default and the creditor can proceed to repossess the vehicle.

The Importance of Perfecting Liens

Liens are a great way for creditors to protect against the risk of lending money. However, liens must be perfected. To perfect a lien, the creditor must file with the appropriate agency. Bankruptcy laws require most liens to be perfected within thirty days of the loan to be treated like secured loans. To ensure your lien is perfected, consult with a creditor rights attorney.

Expert Assistance: Contact a Creditor Rights Attorney

If you have questions about liens, perfecting liens, or foreclosing on liens, call our office at (614)440-1395 to speak with a creditor rights attorney.