Matt D’Angelo authored an article, “What is a lien?” For Business News Daily.
“Lenders need to protect their investments. It’s the reason why loan processes can involve weeks of due diligence. It’s also why many lenders have to secure the loan – if you can’t meet your monthly payments, they sell assets you’ve put up as collateral to try and cover their loss.
This security usually involves a lien, which is a legal filing that allows the lender to claim a piece of property in the event of a default. The lien acts as the vehicle for securing business assets to cover a loan.
“Liens secure a [financial] obligation,” said Stuart Wolfe, a lawyer who represents banks with the firm Wolfe & Wyman. “A lien can’t exist without an obligation. If you pay off the financial obligation on a traditional mortgage on your house, the mortgage or deal of trust goes away because it has nothing to secure.”
Liens can be placed on real estate, equipment or pretty much any other type of personal property.
“‘Personal property’ might sound like it refers to real estate, but it is a legal term that refers to equipment, vehicles, jewelry, furniture and any other things a person can own,” said Jane Muir, an attorney who specializes in commercial litigation, contracts and general counsel.”
Read the complete article here.
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