If a debt is unpaid, such as a credit card debt or past-due child support, the creditor has a right to enforce that debt. Enforcing a debt can mean garnishment, repossession or even filing a lien against property. In order to enforce a debt, the creditor must file legal paperwork against the debtor and obtain a judgment from a judge.
Creditor Liens
Once a creditor obtains a judgment for a debt, that creditor can obtain a right to enforce the debt against the person who owes it. Child support debt is particularly enforced. A creditor has the right to repossess a vehicle in order to sell it to get money. But if the vehicle already has other liens on it, such as a car loan, it may not make sense to repossess the vehicle, and the creditor may elect to file a creditor lien against the property.
Recording Liens
When a creditor has a lien on property, it becomes a "secured" creditor, meaning the debt is secured by collateral; in this case, a vehicle. In order to have a valid lien, a creditor must file or record that lien with the state's department of motor vehicles. The state will then put a note on the title to the vehicle that the vehicle cannot be sold unless all liens are paid off.
Paying off Liens
When selling a vehicle, all recorded liens on the vehicle must be paid off before the vehicle can be sold. If the vehicle is sold for less than the liens, the amount remaining on the liens must be paid out of pocket to satisfy the liens. If liens are not paid off, such as a creditor lien, the creditor can elect to repossess the vehicle to sell at auction.
Selling a Vehicle with Liens
In order to sell a vehicle with liens, the seller must show that he owns the vehicle in "clear title." This means that there are no debts secured to that vehicle that will be taken over by the next buyer. Once a lien is secured to a vehicle, the only way to remove the lien is to pay off the debt. A vehicle with an unclear title cannot be sold until the debt is paid off.
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