With any debt, there are risks for both the lender and the borrower. One of the ways in which lenders protect themselves against potential nonpayment risks is through liens, such as property liens.
A property lien is a legal claim against a piece of personal or real property due to contractual obligations. When someone spends money or incurs expenditure on someone else’s behalf, a lien enables them to hold an interest in that property until the owner compensates them for the expenditure. A lien encumbers a property and prevents it from being sold until the lien is removed. In some cases, liens may even lead to foreclosure.
There are, however, different types of property liens, which we will discuss in this blog to help you better understand the types of property liens in Texas and what you should know about them.
General liens can be placed on all property owned by a debtor, not just real estate. For example, if you are going through a divorce, a general lien (attachment lien) can be placed on your property to prevent you from selling anything during the divorce proceedings.
Specific liens only apply to specific assets. A mortgage lien, for example, is specific to the house you took a mortgage loan on. So, if you default on your mortgage payments, the bank could only claim a security interest against that specific property.
There is a common misconception that liens are only obtained due to failure or refusal to pay a creditor. However, that is not always the case. In Texas, you may face two primary types of liens: voluntary and involuntary.
A mechanic’s lien can be attached to your property if a contractor or mechanic performs work on your property and is not paid for it. Some examples include a mechanic repairing your car or a contractor installing a furnace in your home. If you do not pay the service provider and you sell the property, the lien serves as a security interest and will allow the creditor to claim a portion of the proceeds from the sale of the property in order to pay off the debt you owe. If a mechanic’s lien is placed on real property, it may delay or inhibit the sale of the property until the debt is paid and the lien is removed.
Mortgage liens are voluntary liens levied for the debt accepted to buy a home or other property and are specific to the mortgaged property. The lender can foreclose on your property if you fall behind on your loan payments or break the loan agreement. In order to remove this lien, the mortgage must be paid off in full.
If you are involved in a lawsuit and lose, you receive a judgment from the court outlining what needs to be paid to the person who won the lawsuit. If this court judgment is not paid, the creditor (the winning party) can place a lien on your property. In Texas, judgment liens can remain attached to your property for up to 10 years.
If the estate taxes are not paid on assets that have been passed down after death, estate tax liens are involuntary, general liens issued by the government to secure payment of the outstanding taxes. Texas does not have a state-wide estate tax. However, you or a family member may still have a federal estate tax liability.
An attachment lien is a legal hold that is placed on someone’s property to prevent them from selling it while a legal matter is ongoing. This type of lien is often used in situations such as divorce or bankruptcy proceedings to prevent the sale of the property. Attachment liens are involuntary and can either be general (applying to all of the owner’s property) or specific (applying only to certain items).
On January 1 of each year, a lien is attached to all Texas properties that still have outstanding property tax balances. The lien will be extinguished once the outstanding balance (including all penalties and interest) has been paid in full. However, if you have a property tax debt applicable to your property and still neglect to pay your tax liability, local taxing authorities can choose to foreclose on the property at any point while the lien is attached.
If you are struggling to pay your property taxes, you can settle the balance, remove the property tax lien, and avoid any more expensive penalties and interest with a property tax loan.
Falling behind on your property taxes is easy to do; however, the sky-high penalties and interest can make your outstanding property tax balance even more expensive, making it that much harder to catch up.
Regaining ownership of your property once the tax lien foreclosure process starts can be highly stressful and challenging. You risk losing your property to someone else at an auction, and even though reversing the sale is possible in some cases, it is a lengthy and expensive process. To avoid losing your home to a tax foreclosure sale or to prevent a lien from being placed on your property in the first place, you need to settle your property tax bill as soon as possible.
A property tax loan from AFIC will help you settle any outstanding property taxes immediately and give you the financial freedom to repay the balance in installments rather than one lump sum. At AFIC, we prioritize our customers and will work with you to find the best property tax loan for your personal and financial situation.
Founded in 1946, American Finance & Investment Co., Inc. (AFIC) started by serving the financial needs of El Paso and has since grown to become one of the top property tax lenders in the state of Texas, with a complaint-free track record for over 65 years with the Better Business Bureau.
We offer our clients an affordable, hassle-free way to ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent property taxes and offer you the following benefits:
We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, please contact our experienced team at AFIC today.
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YOUR TAX OFFICE MAY OFFER DELINQUENT TAX INSTALLMENT PLANS THAT MAY BE LESS COSTLY TO YOU. YOU CAN REQUEST INFORMATION ABOUT THE AVAILABILITY OF THESE PLANS FROM THE TAX OFFICE.
If you are over 64 or disabled, don’t get a property tax loan, contact your tax office about a deferral.
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