A lien is typically defined as a claim against a particular item of property. A lien is also known as a security interest. A lien may be made by entities such as the government, a bank, or a person duly authorized by law to create a lien. A creditor, with the consent of the property owner, may also create a lien.

If a property owner defaults on the payment of a loan, a foreclosure of a claim of lien indicates a creditor may take legal action to acquire the collateral applied for the aforementioned loan. A number of states permit lenders to take possession of a property put up as collateral through strict foreclosure.

This means the lender may reclaim said property by declaring that the owner has missed payment/s on a loan. Other states need the lending entity to litigate and file a suit for foreclosure, and gain judgment prior to confiscating and selling off the property.

The amount attained from a foreclosure sale is primarily used to pay the associated debt, plus any related foreclosure expense. In case the proceeds are greater than the debt, the difference goes to the borrower. If the amount cannot cover the debt, a deficiency balance occurs. The lender may choose to go after other assets of the property owner.

The Right of Redemption, the borrower’s legal right to redeem property, is applicable in many states. This entails that the owner may reclaim his property after giving the creditor an amount equivalent to the unpaid debt and other expenditures.

A lien accomplishes three things. It prohibits the property owner from transferring or selling the property in question until the debt is paid or addressed. The lien also permits the claiming entity to proceed with foreclosure and the property’s subsequent sale to address the outstanding amount. Lastly, the lien determines the precedence between a number of creditors who may assert their claims over property associated with the lien.

Moe Bedard
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.