How to Uncover “Hidden Liens” Before Your Next Car or Home Purchase
Most of us only find out about bail when something goes wrong. A lien is essentially a claim against your property for an unpaid debt , and you can get quite far in life before you encounter the word—usually when you buy (or refinance) a house or car , because lenders typically impose a lien on property that is retained. until you pay back the money you borrowed. However, collateral on mortgages and auto loans is a voluntary collateral because you actively agree to it. A lien is placed on your property when someone claims you owe them money—and surprise: anyone can place one . What about hidden liens? Well, read on.
Involuntary Lien
There are several types of forced bail. The most common is a mechanic’s lien, intended to be used by contractors and mechanics to secure unpaid work claims. All the contractor has to do is file some paperwork, include the outstanding invoice, and get the lien certified in court. Local and state authorities, the Internal Revenue Service (IRS) can also force a lien on your property (including your car title) for unpaid taxes or by a judge in a lawsuit.
Typically, liens are recorded in government registries (ownership of a car or a house), and it is difficult to sell property with a forced lien; For example, in most states you are not allowed to transfer title to a car with an outstanding lien (although this may happen if it is a private sale ), and selling a home with an open lien against it usually requires that the lien be released in one way (by paying it off) . disconnection) or other (dismissal of the case by court decision). But sometimes a lien goes unnoticed and becomes a hidden lien. And hidden liens can cause you a lot of trouble.
Hidden liens
A hidden lien is any lien that does not show up in a standard title search. This means that you may legally own a house, car, or other property and only discover a debt claim against that property after the sale is completed and title has been transferred—meaning that you suddenly become legally responsible for someone else’s debt.
There are generally two reasons why a piece of property might have a hidden lien: simple oversight or fraud.
Supervision. Collaterals must be recorded in some way. Municipal liens for unpaid taxes, assessments, or other debts associated with a property must be recorded in the county clerk’s office. If this is not the case, the lien exists but will not show up in a title search. Likewise, any lien placed on the property by a lender must be added to the title of the property, but if someone drops the ball, it may remain hidden.
When you take out a loan against your car or have a lien attached to it to pay off the debt (a mechanic’s lien or a court-ordered lien), the title is expected to be updated and stamped with the lien information (and later stamped again). times the lien will be satisfied). This is usually the responsibility of the lender, and if they forget to do this, the lien will not show up in a standard title search. Sometimes the title has a physical stamp, but the lien is not registered, so you should always ask for the physical title before purchasing a used car.
Fraud. Although not common, it is not uncommon for unscrupulous people to place fraudulent hidden liens on property . This can be done by hiding the lien in long and complex legal documents or by calling the lien something else entirely and then neglecting to properly register the lien with the government. As with any other fraud, efforts must be made to keep the existence of the lien secret, which is why these types of fraudulent liens are easily maintained even after the property is sold.
Detecting hidden collateral
The good news is that hidden liens can usually be discovered if you take a proactive approach when purchasing a home or car (or anything with a title ). You can usually find liens hidden through simple surveillance by performing a deeper search: In addition to a standard title search, you can search municipal records for lien records. There are companies you can hire to do this for you, but these records are public records and you can conduct the search yourself on the website or at your local county clerk’s offices.
To find out your vehicle’s title, check with your local DMV to see if they offer a free title search; some, but not all, do so. You can also search by vehicle identification number (VIN), which will often include information about the lien, even if the lien was not properly recorded at the clerk’s office.