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A security interest in one or more assets that lenders hold in exchange for secured debt financing.


The ability of a lender to sell the collateral if the borrower defaults on a loan. For example, if a loan is secured by one house, the bank or other lender has a lien on the house. It may foreclose and sell the house if the borrower does not make payments in a timely manner. A lien makes a loan less risky for the lender and may entitle the borrower to a lower interest rate or even a higher line of credit. See also: Secured Bond, Mortgage.


The legal right of a creditor to sell mortgaged assets when the debtor is unable or unwilling to meet requirements of a loan agreement. A lien makes a bondholder's claim more secure.


A lien exists when you owe money to a lender on a particular vehicle or other asset, such as real estate, that has been used as collateral on a loan.

An asset on which there's a lien can't be sold until the lienholder has been repaid. When you own an asset on which there's a lien, you risk having it repossessed if you default and don't make the required payments in full and on time.


A legally enforceable claim on the property of another as a result of a debt or obligation. It may be voluntary,such as a mortgage,or involuntary,such as a tax lien.It may be general,such as a judgment lien on all property within a county,or specific,such as a mortgage lien on the described property. One of the most important concepts in lien law is the priority among competing liens if property is insufficient to pay all claims or if the owner files for bankruptcy.The general rules are as follows (however,there may be local variations among the various states):

1. The first lien to be recorded is paid first, and so on in the order of recordation.

2. A statutory lien, such as a mechanics' and materialmen's lien, may be given artificial priority even though recorded after another lien.

3. Lien priority may be reshuffled if a debtor files for bankruptcy. The rules are too complex to examine here.

4. Lien-stripping takes place in bankruptcy when an asset is not worth as much as the accu- mulated liens placed upon it. Junior lienholders are stripped out and turned into unse- cured creditors. Even mortgage liens may be reduced in amount, if the real estate is not worth as much as the loan balance.

5. A landlord's statutory lien for unpaid rent can be avoided, or set aside, by a bankruptcy trustee, but a landlord's contractual lien cannot be avoided unless lien-stripping comes into play.

References in periodicals archive ?
His group encourages owners to enter into payment arrangements with the lienholders, and provides counseling for senior citizens, for whom, he says, reverse equity mortgages may provide an answer to both lien and future property tax payment problems.
Outside of California, senior lienholders must be wary of accepting deeds in lieu of foreclosure, in light of recent court decisions allowing for the equitable subordination of senior debts in some instances.
3d DCA 1987), the court held that the doctrine could be applied even when the third lienholder (now seeking to stand in the shoes of the senior lienholder) had constructive notice of the second intervening lien.
In deals where there are no mortgage insurers or junior lienholders involved, servicers generally have the authority to say what purchase offer they'll accept, she says.
While the recovery rights of other possible lien holders is subject to their statutory or contractual rights of recovery, the Bradley analysis will be problematic for these lienholders in their attempts to collect from the portion of the settlement allocated to the survivors.
pid=conewsstory&tkr=MSFT:US&sid=AssOhkekB0bl (describing conflict between first-lienholders, second lienholders and unsecured creditors and competing plans).
The bill provides that the distribution of any sale proceeds to purchase money lienholders on units must not exceed a unit's share of the proceeds.
The second amendment would allow governmental tax hens to be paid in full before junior lienholders are paid.
Lienholders who sign up for ELT can avoid receiving paper titles and instead will receive a digital record with the lien and title information.
Given the size of the senior mortgage in these situations, most or all of the proceeds will be distributed to this claim, leaving little or no money for junior lienholders or unsecured creditors.
Another complicating factor is that many insurance carriers do not routinely deal with lienholders.
As a result, lienholders and state governments are unwitting participants in losses from consumer fraud.