Transcript Slide 1

Liens, Levies & Promises
Liens, Levies & Promises
Neither the information in this presentation, nor in the associated
discussion, is in the text.
A “lien” is a legal right to apply another
person’s property to the payment of a
debt owed to the lienholder by the
property’s title holder (“owner”).
Frequently a lien is made known by a
document filed with the same government office that records deeds or claims
against property.
A lien against real property is frequently called an “encumbrance.”
A lien can come into existence in a number of ways, some
voluntary, some not.
Examples of voluntary liens include:
Mortgages on real property.
Seller’s or bank’s security interest
in automobiles.
Examples of involuntary ones :
Tax lien
Judgment lien
A voluntary lien comes into existence when the owner of an item of
property grants to another party the right to sell that property to
pay off a debt. This is usually done in a written contract or document.
Some liens, such as those against automobiles, must be shown on
title documents.
An involuntary lien when the law grants one party (sometimes the
government) the right to seize and sell another party’s property to
satisfy a debt. The entry of a court judgment or non-payment of
taxes are the most frequent types of involuntary liens.
There are a number of liens that might be called “semi-voluntary.
These are created by statute (usually state). They grant a lien for
payment to a party that has performed labor goods or services with
respect to a particular items. The lien is only against the item.
These are “semi-voluntary” because the item’s owner must first
agree (contract) that the person perform the labor, goods, or
services.
Most states give
watchmakers a
lien on the items
they repair.
The more traditional of these liens are commonly called “artisans’ ”
liens.
Artisans’ liens are created by state law. There is a core group that appear in
most states’ statutes. There are often additional ones that reflect the economy
of the state or address a particular problem that arose in the state sometime
in the past.
Some liens granted by Texas statute are:
Mechanic’s, Contractor’s or Materialman’s lien (on real property)
A general “workers’ lien” in favor of anyone who does work on specific
items of property. [Broader, but includes, traditional “artisans” lien.]
Stable keeper’s, garageman’s, pasturer’s, or cotton ginner’s lien
Plastic fabricator’s lien on customer’s molds, dies
Stock breeder’s lien on resulting offspring
Agricultural producer’s lien products sold and delivered before payment
The so-called “mechanic’s” lien grants a lien
against real property in favor of those who
do something that “improves” that property.
Persons or companies that might have a lien:
General contractors who oversee the entire job.
“Sub-contractors, like electricians, plumbers, roofers, etc.
Persons who supply materials to the workers, such as
the lumber yard, the plumbing supply company, the
custom-window manufacturer. [“Materialmen” ]
It is not necessary that the property owner have a direct contract
with, or even know specifically about a particular supplier or worker.
To foreclose on a mechanic’s lien, the lien holder generally must:
File a notice of lien with the local official who records deeds,
usually within a very short period (often 30 days after completion).
File a legal action to foreclose and obtain a judgment allowing the
improved property to be sold to pay the debt.
In many states, materialmen must give a specific notice to the land
owner BEFORE the materials are actually delivered to the property.
“Artisan’s” liens are like “mechanic’s” liens, except artisan’s
liens are given to persons who do work on personal property.
The liens given by Texas law to garagemen, stable keepers,
and general workers are typical artisan’s liens.
Artisan’s liens generally differ from mechanic’s liens in that the
lien exists ONLY as long as the lienholder has possession of
the item.
In Texas, there is a special rule that
allows the lienholder to “re-possess”
the item if she gave it back to the owner
after “payment” with a bad credit card,
rubber check, or the owner puts a
“stop-payment” on the check or charge.
In most states, including Texas, the artisan does not have
to go to court to enforce her or his lien. If the proper time
periods and notice procedures are observed, the artisan
can sell the item. From the sale proceeds, she keeps
enough cash to pay the debt and gives what is left to the
item’s prior owner.
Many artisans file a court action and obtain
a court judgment, even though it is not
necessary. If a court action is filed, the
artisan:
Eliminates the risk of missing one of the
obscure and numerous procedural rules
A “levy” is the legal act that connects or “attaches”
the debt to a particular item.
In many states, real property taxes are not imposed
on the property owner. Instead, they are levied directly
on the real property. The owner has no legal obligation
to pay the taxes. Of course if he does not, the property
will eventually be sold for delinquent taxes.
The I.R.S. may serve a “notice of levy”
on someone that owes money to, or
holds property of, a delinquent taxpayer.
That attaches the I.R.S. tax lien to the
property owed or held by the served
person.
If the debtor does not pay, a lien holder can “foreclose” on
the encumbered property to pay the debt – court action.
Normally, the lien holder forecloses by selling the
property and applying the resulting cash to:
Costs incurred in foreclosure (fees, advertising, etc.), then
The debt, including interest, late fees, etc., as in the contract.
If there is anything left over, that belongs to the debtor.
If the sale does not bring in enough to pay the costs and
the debt, the result varies.
Some statutes allow the creditor to take the same actions
as any other unsecured creditor, i.e. collect the “deficiency”
by legal action. Some statutes do not allow the creditor to
take further action. The sale proceeds is all that he gets.
When a judgment is entered, it automatically becomes a lien on
all real property interests of the judgment debtor in the county
where the judgment was entered. (That can be extended to other
counties by filing the judgment in the other county.)
A judgment becomes a lien on personal property only when
the personal property is “attached” or “levied on” by the sheriff.
To attach personal property
the sheriff or his deputies
go out and find the debtor’s
property and take physical
custody of it.
Property (real or personal) subject to a judgment lien is sold by
the sheriff, normally at an auction held on the courthouse
steps – or the front door if there are no steps.
Naturally, this type of sale does not result
in a good price. Usually, (a) very few know
about the sale, (b) the buyer must pay cash,
in full, at the sale or no less than a day later,
(c) people know sheriffs’ sales are a place
to get a real bargain.
The lien holder can “pay” a sale price with
all or part of the amount owed. Usually
the lien holder is the highest bidder.
If the auction does not produce enough
to pay the costs and the debt, the creditor
can send the sheriff’s deputies out to find
more stuff.
E.
“Exempt” Property
1.
2.
Every jurisdiction has statutory list of property that cannot be taken
by creditor to satisfy debts
a.
Usually considered the minimum necessary to live, maintain family
b.
Many statutes are very, very old — unreasonable due to inflation
Bankruptcy law allows debtor to keep exempt property
a.
b.
Originally used state exemptions (not uniform)
Enacted bankruptcy exemption list
(1) Caused inequality within each state, equality across states
(2) Amended to allow states to require use of state exemption
rules
(3) Most (35+) decided to require state exemptions
TEXAS PROPERTY CODE
Title 5. Exempt Property and Liens
Chapter 41. Interests in Land
Chapter 42. Personal Property
Chapter 43. Exempt Public Property
Chapter 44. Taxation of Retirement Benefits by Another State
Chapter 51. Provisions Generally Applicable to Liens
Chapter 52. Judgment Lien
Chapter 53. Mechanic's, Contractor's, or Materialman's Lien
Chapter 54. Landlord's Liens
Chapter 55. Hospital Lien
Chapter 56. Liens Against Mineral Property
Chapter 57. Railroad Laborer's Lien
Chapter 58. Farm, Factory, and Store Worker's Liens
Chapter 59. Self-service Storage Facility Liens
Chapter 60. Newspaper Employee's Lien
Chapter 61. Motor Vehicle Mortgagee's Lien
Chapter 62. Broker's & Appraiser's Lien on Commercial Real Estate
Chapter 63. Manufactured Home Lien
Chapter 70. Miscellaneous Liens
TEXAS PROPERTY CODE
§ 41.001. Interests in Land Exempt from Seizure
(a) A homestead and one or more lots used for a place of burial of the
dead are exempt from seizure for the claims of creditors except for
encumbrances properly fixed on homestead property.
(b) [ omitted ]
(c) The homestead claimant's proceeds of a sale of a homestead are not
subject to seizure for a creditor's claim for six months after the date of sale.
§ 41.002. Definition of Homestead
(a) If used for the purposes of an urban home or as both an urban home and
a place to exercise a calling or business, the homestead of a family or a single,
adult person, not otherwise entitled to a homestead, shall consist of not more
than 10 acres of land which may be in one or more contiguous lots, together
with any improvements thereon.
(b) If used for the purposes of a rural home, the homestead shall consist of:
(1) for a family, not more than 200 acres, which may be in one or more
parcels, with the improvements thereon; or
(2) for a single, adult person, not otherwise entitled to a homestead,
not more than 100 acres, which may be in one or more parcels, with the
improvements thereon.
CHAPTER 42. PERSONAL PROPERTY
§ 42.001. Personal Property Exemption
(a) Personal property, as described in Section 42.002, is exempt from
garnishment, attachment, execution, or other seizure if:
(1) the property is provided for a family and has an aggregate fair market
value of not more than $60,000, exclusive of the amount of any liens,
security interests, or other charges encumbering the property; or
(2) the property is owned by a single adult, who is not a member of a family,
and has an aggregate fair market value of not more than $30,000,
exclusive of the amount of any liens, security interests, or other charges
encumbering the property.
(b) The following personal property is exempt from seizure and is not included in
the aggregate limitations prescribed by Subsection (a):
(1) current wages for personal services, except for the enforcement of courtordered child support payments;
(2) professionally prescribed health aids of a debtor or a dependent of a debtor;
(3) alimony, support, or separate maintenance received or to be received by the
debtor for the support of the debtor or a dependent of the debtor.
(c) This section does not prevent seizure by a secured creditor with a contractual
landlord's lien or other security in the property to be seized.
(d) Unpaid commissions for personal services not to exceed 25 percent of the
aggregate limitations prescribed by Subsection (a) are exempt from seizure
and are included in the aggregate.
§ 42.002. Personal Property
(a) The following personal property is exempt under Section 42.001(a):
(1) home furnishings, including family heirlooms;
(2) provisions for consumption;
(3) farming or ranching vehicles and implements;
(4) tools, equipment, books, and apparatus, including boats and motor
vehicles used in a trade or profession;
(5) wearing apparel;
(6) jewelry not to exceed 25 percent of the aggregate limitations [sec. 42.001];
(7) two firearms;
(8) athletic and sporting equipment, including bicycles;
(9) a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each
member of a family or single adult who holds a driver's license or who
does not hold a driver's license but who relies on another person to operate
the vehicle for the benefit of the nonlicensed person;
(10) the following animals and forage on hand for their consumption:
(A) two horses, mules, or donkeys and a saddle, blanket, and bridle for each;
(B) 12 head of cattle;
(C) 60 head of other types of livestock; and
(D) 120 fowl; and
(11) household pets.