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How to Resolve Liens

How to Resolve Liens

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Mark Cappel
UpdatedJun 12, 2024
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    9 min read
Key Takeaways:
  • How tax, mechanics and judgment liens are placed on property.
  • How a lien can impact the rights you have to your property.
  • Some liens can be placed on a property without a court trial.

How to Handle a Tax, Judgment or Mechanics Lien

A lien is a claim on real property (such as a house) or personal property (such as a car, furniture, or a store’s merchandise) to ensure payment of a debt. For example, if you borrow money to buy a car, the lender will file a lien with the state DMV that is noted on the vehicle’s title. If you default on the loan, the lien gives the lender the right to take the car. In loan situations, the borrower allows the lender to place a lien on the title voluntarily as a condition for receiving the loan.

A lien can also be put on the title to a house or personal property involuntarily. An involuntary lien can result from a court order called a judgment. An involuntary lien can also occur administratively by a government agency for the failure to pay personal, business, or property taxes. Liens are recorded with the county register of deeds (in the case of real property) or the Secretary of State (for business debt) as security that a debt will be paid from proceeds when a owner sells the property.

A judgment is a court’s order for a judgment-debtor to pay a judgment-creditor money. The judgment allows the judgment-creditor to place a legal claim, called an encumbrance, on the judgment-debtor’s property. This encumbrance is commonly a lien. A party who possesses a lien is called a lienholder.

Three common liens on real property include:

  • Mechanics lien recorded by a tradesman furnishing labor or materials for construction work
  • Tax lien recorded by a government tax agency
  • Judgment lien issued by a court on real property owned by the judgment-debtor

Liens are allowed in all states. However, the details for how judgment and mechanics liens are implemented vary in each state. Generally, a creditor files a lawsuit with a state court, at which time the creditor is required to give the consumer notice of the lawsuit. The notice is called a summons & complaint. If the consumer fails to respond to the summons and complaint to defend him or herself in court, or if the defense is not persuasive, the court will rule in favor of the creditor and award a judgment. The judgment allows the judgment-creditor to obtain a lien on the judgment-debtor’s property, place a levy on his or her financial accounts, get a writ a replevin for his or her personal property, and in many state obtain a wage garnishment. (More on these other remedies at the end of this article.)

Administrative liens follow a similar procedure, but do not involve state courts. Instead, the procedure is in-house to the agency (typically the IRS), which conducts its own hearings. If you fail to respond to the agency’s notices of an intent to file a lien, you will lose by default.

Real Estate

A lien is a notice to anyone who wants to buy property a judgment-creditor has a claim against the property. Typically, the buyer will want the lien paid before he or she buys the property. However, it is possible for a buyer to take title to real property that is subject to a lien.

The title to real property is akin to a file folder. Real property titles contain a history of ownership and claims on a property since the beginning of the county's existence. When a lien is filed on the title, it remains in place until the county recorder receives a notice the lien is paid or a court orders the lien extinguished.

More than one lien can be filed on a property. Liens are stacked in date priority with the oldest liens being paid first. The exception to this rule are federal tax liens, which take priority over older liens (Uniform Federal Lien Registration Act). In some jurisdictions, a judgment-creditor lienholder has a right to foreclose. This is rare.

Vehicle Lien

Failing to pay a loan secured by a vehicle will result in a repossession.

When the debt is repaid, the lender releases the lien by filing a document called a lien release. The lien is then removed from the records and the state DMV issues a clear title, showing the owner’s free and clear title to the vehicle.

Tax & Federal Liens

A federal tax lien is the government’s legal claim against property, including real estate, personal property and financial assets, when a person fails to pay a tax debt. A federal tax lien exists after the IRS or local tax authority sends the property owner a notice and payment demand and the owner either neglects to or refuses to pay the debt by the deadline. Read the resource IRS Debt and Tax Lien to learn about the five options to resolve tax debt and avoid a tax lien.

Federal liens have a limited life:

  • Federal tax lien: 10 years from assessment date (26 USC 6502(a)); 10 year extension (26 USC 6323(g)(3)); extension by agreement (26 USC 6502(a)(2)); possible tolling of 10 year period (26 USC 6503).
  • Federal estate or gift tax lien: 10 years from death or gift (26 USC 6324(a) and (b)); lien by agreement (26 USC 6324A).
  • Employer liability (ERISA) lien: Six years from termination of plan, with possible tolling of six year period (29 USC 1368(b) and (d)).
  • Recorded abstract of federal civil judgment: 20 years from recording, renewable for 20 years (28 USC 3201(a)).
  • Recorded notice of federal criminal fine: Until death of the person fined or the later of 20 years from entry or 20 years after release from prison (18 USC 3613(b)).
  • Federal environmental (CERCLA) lien: Until satisfied or until U.S. action is time barred (42 USC 9613; 42 USC 9607).
  • State law lien arising after entry or registration of U.S. judgment in state court: As provided by state law. Some state tax liens have a lifespan of as little as 3 years.

Mechanic’s Lien

Statutes in most states give mechanics and tradesmen or persons who furnish materials for the construction of houses or other buildings the right to a lien or preference in the payment of debts out of the houses and buildings.

The lien generally attaches from the start of work or the furnishing of materials and continues for a limited period of time. In some states, a claim must be filed within a limited time. In some states no lien is created unless the work done or the goods furnished amount to a certain specified sum, while in others there is no limit to the amount. In general, only the original contractors can make a claim, but sometimes sub-contractors can too.

In some states, people who repair automobiles and other vehicles have the right to place a mechanics lien on a vehicle if the vehicle’s owner does not pay for the repairs.

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Liens & Your State’s Laws

When a judgment-creditor or government agency files a lien on your property, it does not mean you must sell the property, or that the judgment-creditor or government agency owns or even wants to own your property. As mentioned above, what it does mean is when you sell or refinance the property, the lienholder will collect on the lien that was placed on your house or land. This means that money from the sale goes to the lienholder.

The details for the procedures to create and remove a lien vary by state. Your best source of information is a lawyer in your state of residence who has consumer law experience.

If you are a judgment-creditor and wish to file a lien, the same advice applies. Judges typically follow state civil procedure rules for remedies to the letter to preserve the rights of judgment-debtors. A judgment-creditor’s error in filing a lien may result in the judgment-creditor scuttling all of their work and expense in obtaining the lien. Consult with a lawyer before you file the documents needed to obtain a lien.

How to Handle a Lien

Your best course of action to handle a lien is to avoid one in the first place. If you receive a notice of a pending lien from either a judgment-creditor or a government agency, open a negotiation immediately to try to resolve the debt before it becomes a lien.

If the lien is already recorded, then negotiate with the judgment-creditor or agency to reach a settlement on the debt. If you are about to sell the property, then the judgment-creditor or agency will be less willing to settle the debt for less than the amount due. However, if you have no immediate plans to sell the property, then you have some leverage to negotiate a settlement for less than the full amount. Be sure to get any settlement in writing, including a statement from the judgment-creditor or agency that it will file a lien release in a timely manner.

Remedies: A Lien May Not Be Your Only Worry

Liens, wage garnishments, account levies, and writs of replevin are what the law calls remedies for legal and administrative judgments. Judgment creditors can, depending on your state’s laws, use all of these remedies to collect a debt.

Wage garnishments are a court or administrative order to a consumer’s employer to withhold part of the consumer’s wages in payment of a debt.

Levies are a court order or an administrative action used to withdraw funds from a consumer’s financial institution account. Levies are generally used when a consumer has failed to resolve a debt through voluntary payment. In some states, an account levy is called an account freeze or account garnishment. The terms may be different, but the result is the same.

Writs of replevin are used to close a consumer’s business or seize their real or personal property. Writs of replevin are used when a consumer has failed to resolve their debt through voluntary payments. In some states, writs of replevin are called fieri facias ("fi fa"), warrants, or claim and delivery. In comparison to wage garnishments and account levies, replevin is rarely used by judgment creditors. However, that is not to say replevin is never used. If you own a high-value vehicle or piece of art, an aggressive judgment-creditor may use replevin to seize the valuable item.

Debt statistics

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in Kansas credit card delinquency rate was 3%, and the median credit card debt was $445.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.



AAliza epstein, Nov, 2020

I bought a car and was sent the title without a lien on it even though I still owed a balance of 1100. The work they were suppose to do before I paid the rest off was never completed. They are demanding payment ans threatening to take the car. If i have the title and there's no lien can they do that? Can they add a lien after the fact if i have clear title in hand? Please help.

DDaniel Cohen, Nov, 2020

Aliza, the best I can do is offer some general comments, You need to address your question to a lawyer to get the authoritative answer your question needs. 

The fact that they didn't do the work muddies the situation. Otherwise, you didn't pay them what you agreed to pay when you signed a contract. I don't know if the transfer of the title eliminates their ability to repossess the car, as you may not have fulfilled the terms of the agreement you signed. Even if they can't repossess the car, it would seem that they can say that you owe them money and sue you for not paying them as agreed. Take the finance agreement to a lawyer to review.

Perhpas you can give some thought to a reasonable compromise, where you pay what you you owe, less the work they didn't do?

DDomenick, Sep, 2020

Landlord tenant issue. Landlord did not want to give deposit back. What are the appropriate forms to file a lien on his property to ensure I get my money back someday. Was already awarded judgement and sued for treble damages as well. He is self employed so I can’t do wage garnishment. So his property is my only option.

DDaniel Cohen, Sep, 2020

Domenick, one route would be to levy a bank account he has. You may be able to go back to the court that issued the judgment and force your former landlord to declare what he owns. A lien is a possibility, but that doesn't guarantee collection.

BBarbara, Jun, 2020

Credit card Judgment filed against me in NJ in 2012. Moved to PA In 2012 prior To the lawsuit. First certified Mail received in 2018. No lawsuit filed against me in PA but they still send letters of garnishment to my Employers. Is that because the company is based in almost all U.S. states? I cannot find any lawsuit filed against me in Pennsylvania. If I work for a company registered only in PA would that prevent them from garnishing my wages since there is no lawsuit filed against me in PA?

DDaniel Cohen, Jul, 2020

I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

PA doesn't allow wage garnishments. If your paychecks are from a PA entity, you should be safe from a wage garnishment for a credit card debt. If you are paid from an out-of-state payroll office, you could be garnished, depending on the laws in the payroll-office state and if the NJ judgment were domesticated in that state.

AAnonymous, Oct, 2018

Million dollar question; A bank (car 'loan') has defaulted on the 3 step; Conditional Acceptance/Validation of Debt, Notice of default/Opportunity to cure and Notice of Estoppel, process, for the obvious reasons. How does one get the lien removed from the car title? Thanks in advance for any non-legal advice.

DDaniel Cohen, Oct, 2018

I don't know how you can compel the lien holder to provide the proper paperwork you will need to get your state's DMV to agree to remove the lien. I would speak with the DMV to hear what they accept and whether what you can prove you achieved so far is sufficient. If not, speak with an attorney, from whom you can receive an authoritative "million dollar" answer. 

We would value you sharing what you find out, to provide that useful information to other readers.

AAnonymous, Oct, 2018

HAHAHAHA! Thx Daniel for that million and one dollar response! I'm afraid I'll have to go the liar, oops, lawyer route, but NO ONE seems to know this answer. DMV requires an 'Lien Release' from the lien-holder, albeit a fraudulent lien...I will CERTAINLY share with you all and as much of the world I can reach, WHEN I discover recourse. Thx again for responding!

DDaniel Cohen, Oct, 2018

You're welcome. I hope the cost of getting an answer that leads you to a positive result is not too expensive.