Liens
Liens are legal claims to property as
security for an unpaid debt. Most liens are voluntary as a
condition for gaining access to credit. A cosigner for a loan
may appear as a lien holder until the loan balance is paid in
full. Mortgage companies and automobile lenders will have a lien
on that collateral until the original loan is paid in full.
These are everyday liens that many of us have as a result of
using credit secured by collateral.
Liens can also be placed on property
involuntarily because the debtor defaulted on the debt. A
mechanic can place a lien on an automobile or other property
under repair if the owner fails to pay the full cost of those
repairs. Governments can also place a tax lien on property if a
taxpayer fails to pay a substantial tax liability. A tax lien is
the government's way of securing what would otherwise be an
unsecured debt.
Expect a paid tax lien to remain on your
credit report for 7 years after the final payment. Unpaid tax
liens remain for 15 years.
Liens appear on credit reports to distinguish
debts that are secured by property. Many secured loans will even
list the loan payoff date on your credit report as the date that
the lien holder will relinquish the claim to that property.
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