While laws vary by state, a creditor can obtain a lien if a business fails to satisfy a debt. The lien can arise by agreement, by losing a lawsuit to collect a debt, or by failing to pay your taxes.
A judgment lien is granted to a creditor by a court as security for a monetary judgment. In short, you lost a lawsuit and the court has adjudicated that you owe the other side an amount certain. This lien preserves the payment of the debt if the business owner sells the property. A judgment lien can be removed only by paying it, by agreement with the judgment creditor, by filing bankruptcy (with important exceptions), or by having it vacated by the court (rarely granted—e.g., the other side obtained the judgment by fraud).
A tax lien on a business property acts to secure the debt and can be placed on the property by local, state or federal taxing authorities for failure to pay taxes. The lien is usually for the amount owed in back taxes. If the taxes owed are paid by the business owner, the lien can usually be removed within 30 days.
If a business voluntarily offers property as security in a contractual obligation, this is known as a security interest lien. If the business defaults on its obligations under the contract, a creditor can take possession of the property.
A mechanic’s lien is placed on business property by a contractor, subcontractor or supplier if a business fails to satisfy a debt. This type of lien usually prevents the business owner from refinancing or selling the property, although in some cases it can allow the creditor to sell the property at auction to repay the debt.
If you are applying for a short-term loan, your lender may take a blanket lien, which gives them the right to seize other assets in the event of nonpayment. If the blanket lien is in the first lien position, this could cause big problems down the road.
The best way to have a lien removed from your business property is to pay off the debt. Once the debt is satisfied, the lien holder will file a release and you are free to sell, trade or borrow against the property.
When you are facing any type of business dispute, you need an experienced Arizona trial attorney to obtain the best possible result. Contact Williams Commercial Law Group, L.L.P., at (602) 256-9400 to speak with us about your case.
- Category: Business Litigation
- By rainmakereditor
- October 15, 2018
- Leave a comment
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