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Types of Liens: Judgment, Statutory & Consensual

Instructor: Elizabeth Branum
There are three basic types of liens: consensual, statutory and judgment. In this lesson, we will provide descriptions and examples of each lien type.

Introduction

A lien is a legal claim to someone else's property to assure the payment of a debt or the satisfaction of an obligation. There are three basic types of liens: consensual, statutory and judgment. A discussion of each type follows.

Consensual Liens

Consensual liens are those to which one voluntarily consents, usually because of a loan. The property purchased secures the buyer's obligation to pay for the property. One common example is the residential mortgage when a home buyer consents to a bank taking a security interest in the home with a mortgage. Likewise, a security interest also is created when a car dealer arranges for financing for a car buyer. There are two classes of consensual liens. These are purchase money security interest liens and non-purchase-money security interest liens.

In a purchase-money security interest lien, the creditor extends credit to the debtor specifically for the purchase of the property that secures the debt. Common examples of this type of lien are a car loan or a home mortgage.

With non-purchase-money security interest liens, the debtor pledges property he or she already owns as collateral for a loan. The loan proceeds may be used to pay expenses or to buy other property. Examples include a second mortgage on a home or a loan used to pay operating expenses with previously owned equipment used as collateral.

Both types of consensual liens are usually non-possessory, meaning the creditor does not take possession of the property. However, it's possible for either the purchase-money security interest or the non-purchase-money security interest lien to be possessory. This is demonstrated in the case of a loan from a pawnbroker which creates a possessory, non-purchase-money security interest lien in the collateral.

Statutory Liens

Statutory liens come about due to a statute. The creditors can obtain a security interest in property because there is a law that allows for it. Examples of statutory liens include mechanic's, artisan's, warehouseman's, and tax liens.

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