How to Remove a Lien
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What is a Property Lien?
A lien is a notice that’s attached to your real property signifying that a creditor claims you owe money. Most people take out a mortgage to pay off their home. If you default on your mortgage, the creditor can place a lien on your property. A lien is public record and can be discovered through a simple title search. Real property liens are typically filed with a county recorder’s office. Liens on real property are commonly used by creditors to collect what is owed. In that regard, creditors may act to foreclose on the property.
How Do I Remove a Lien from My Property?
Removing a lien on a property can be a complicated and stressful process, and it prevents you from selling your home until the lien is removed. Below are various ways a person can remove a lien on real property.
- Satisfy the debt – Paying off the debt in-full can remove the lien so long as you file a Release of Lien form. The form must be signed by the lienholder/creditor in the presence of a notary public and filed with the county recorder’s office.
- Obtain a Court Order – A court may order for a lien to be removed if the lien was obtained through fraud, coercion, bad faith, or other improper means.
- Lien Avoidance – Lien avoidance allows the debtor to be free from their lien and debt obligations. These are usually available in conjunction with Chapter 7 Bankruptcy filings. They may only apply to certain liens (usually judicial liens) and may sometimes be enforceable for a limited amount of time, such as during bankruptcy proceedings.
- Private negotiations – Working out a settlement agreement with a lienholder, typically through arbitration, mediation, or informal negotiations, can remove a lien. For instance, a creditor may agree to remove the lien if the debtor agrees to pay higher monthly payments and a higher interest rate on the mortgage.
- Running of Statute of Limitations – States have limitations on how long a lien is valid as well as how long a creditor has to file suit after the debtor defaults. Each state has different rules.
Does a Property Lien Affect Title?
A property lien can put a “cloud” or irregularity in the chain of title of a property. Clouds on title are discovered during a title search. It is important to remove a lien before you refinance or sell your home as both require clear title. During a property transaction, a buyer, their mortgage lender and the title insurance company will review the title history of the property in question to ensure that the buyer can purchase the property without any liens or encumbrances. If the seller has any outstanding liens, a buyer can back out of the home purchase, even if the buyer is already in contract to buy the house. Moreover, banks and lenders will not provide a mortgage to a new buyer until all liens on the property have been removed.
How to Remove a Lien After a Debt is Paid?
For purposes of selling or refinancing a home, it’s important to remove a lien after a debt has been fully satisfied. To remove the debt, you must:
- Get a Lien Release form from your local county clerk’s office;
- Fill the form out completely by providing information about the lienholder, borrower, property description and address;
- Show proof that the debt was paid in-full;
- Have the lienholder sign the Lien Release in the presence of a notary public; and,
- File the form with the appropriate county clerk’s office, paying the appropriate filing fees.
Do I Need a Lawyer?
If you have a lien on your property, fear not; there are several different ways to remove the lien. A lawyer can help you navigate through the process and file appropriate paperwork. They can also negotiate with a creditor to potentially lower your debt. A real estate attorney will be able to explain the various options available to you under the laws in your state.
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Last Modified: 05-11-2017 08:45 PM PDT
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