A lien is a tool used to collect or secure interest in a debt. It’s a legal action that’s also a public record and often reported on your credit report. If a lien is filed against you, it can be difficult to obtain new credit and sometimes hard to find a new job. Most lien holders are willing to work with you to release the lien and might offer a conditional or unconditional release. Depending on the type of lien filed against you, you might be eligible for a partial release or reorganization of lien priority.
A lien attaches to physical property you own, but in most cases, the lien holder only receives an interest in your property. If you keep whatever the lien is attached to and do not sell it, the property remains yours. However, in some cases a lien may prevent the completion of a project. For example, if you hire a contractor for a construction project and don’t pay according to the agreement made with the contractor, or you take your car in for repairs and don’t pay the bill, you could have a mechanic’s lien filed against you. After a mechanic’s lien is filed, a contractor isn’t legally obligated to finish your project until you pay the lien or make arrangements to pay.
A conditional lien release means you make arrangements to pay the lien by issuing a payment to the lien holder. The lien is released upon the condition that your payment clears. This differs from other types of lien releases because if your payment isn’t honored by the bank, the lien goes back in effect.
Consider your lien satisfied if you receive an unconditional release. This type of release doesn’t place any restrictions on the discharge of your property from the lien. In most cases, it means your check for a conditional release has cleared or you have made suitable arrangements to clear the debt. The lien holder isn’t waiting for any other events to take place to clear the lien.
Partial Lien Releases and Subordinations
A partial release occurs when the lien holder agrees to release some of your property from a lien. A partial release doesn’t mean you no longer owe the money, and the lien may still attach to future assets you acquire. In some cases, it may be beneficial for a lien holder to take a step down in lien position priority, or become subordinate to another lien holder. For example, if you’re trying to get a loan to pay the lien, the new lender may not approve the loan because it will have a junior position to the lien holder. The lien holder may approve the subordination to allow the loan to go through and get paid.