Understanding Bankruptcy

Liens

Claim against a debtor’s property that takes priority over other claims

 

• Mechanic's lien
• Artisan's lien
• Judicial liens
• Writ of Attachment
• Writ of Execution

 

Liens are legal claims against both real and personal property of debtor. It takes priority over other types of claims made by creditors against the same debtor. Although the term "lien" holds a bad caution, lines are part of everyday transaction. For example, when a person goes to dry cleaners, a lien is created until the consumer pays for the service acquired. Both the common law and statutory law created types of liens to be used in different situations. The most notable lines are: mechanic' lien, artisan's lien, and judicial liens.

Mechanic's liens are created when the holder of a right regarding a real property acquires services or labor or materials for the purpose of improving the real property without paying immediately for the work done. The provider of services or labor or materials becomes a creditor while the holder of a right becomes a debtor; as for the real property, it becomes a security instrument for the debt. Mechanic’s lien must be filled properly and within a certain time period that differs depending on the state and the type of work done. The Creditor must follow all federal and state statues before foreclosing on the debtor’s property. Any excess funds after the sale are sent to the debtor.

Artisan's lien is similar to mechanic’s lien except it is created regarding personal property. For example, if a person takes his watch for repair at jewelry store, the store owner can hold the watch until the watch owner pays for the service rendered. In case a payment or an arraignment for payment was never established, the store owner can sell the watch to satisfy the debt.

Judicial liens are created after a court hearing. A creditor will sue debtors to collect through the sale of assets belonging to the debtor. Judicial liens require a court hearing in front of sworn judge. Debtor is notified and judgment is only issued after the court hears from both parties. Both federal and state laws provide a number of exemptions on real and personal properties. Creditors can ask the court to seize property of the debtor before the case is heard. In this case, the creditor must post bond with the court to cover all legal fees and the expected amount resulting from the sale of debtor's property. This process is called "writ of attachment". If the court orders the debtor's property to be seized after judgment, the process is called "writ of execution".