What is a Lien in Wisconsin?
Liens in Wisconsin are legal charges levied on an asset by creditors who want an asset owner to compensate them or fulfill an undertaking. Essentially, a lien protects the creditor from a debtor's shortcomings. Once a lien is secured, the lender has the right to use any of the debtor's assets or a specific asset for monetary compensation if the debtor defaults in payment. The lien also restricts the defaulter from selling the asset. The creditor may take the asset and sell it to recover the loan or duty owed.
The different types of liens in Wisconsin are detailed in Chapter 779 of the Wisconsin Statutes. In Wisconsin, liens may be voluntary or involuntary. Lending money is an example of a situation that warrants a voluntary lien agreement. In contrast, tax payment is an excellent example of an involuntary lien. Liens are mandated by state laws and enforced by judicial orders issued by Wisconsin courts.
Types of Lien in Wisconsin
There are many different types of lien, according to Wisconsin state law.
The first type is a Property Lien. A property lien is placed on an individual's property as security for any debt owed by the owner. Once this debt is paid, the lien expires and is removed from the debtor's property.
Next is the Contractual Liability Lien. Also called a Mechanic's or Materialman's Lien, these liens are most common in construction-related businesses. They are filed with the state or county where the project is situated, and they provide security to servicemen who do not receive payment before offering their service.
The Judgment Mortgage Liens are placed on an individual's real estate as security for debts owed to another party. These liens give the creditor the legal right to take possession of real estate(s) if they become delinquent or fail to pay off the Liens.
Prohibition Liens are placed on an individual's property as a preventative measure by court order. It allows a person to place liens on personal property owned by them in case there is a judgment against them and money owed to compensate the injured party/parties. These Liens expire after 36 months from the issuance date unless contested, removed, or renewed before that period elapses.
State tax liens are placed on an individual's property as security for back state taxes as well as due process protections guaranteed under the U.S. and Wisconsin Constitutions. These Liens last 10 years from the date of assessment unless renewed. Creditors can renew a lien by filing an additional lien statement with the register of deeds in each county where the property is located and sending notice of such filing to the taxpayer and other parties known by the state to have interests in the property.
What is a Property Lien in Wisconsin?
In Wisconsin, a property lien is a valid claim on a debtor's asset as collateral in a contract. Creditors can claim the collateral to cover the debts owed with a property lien. Depending on the type of agreement between a debtor and creditor, items like a car, furniture, home, or other real or personal properties may be used as collateral. Property liens in Wisconsin can be in the form of tax liens, mortgage liens, mechanics liens, UCC liens, or judgment liens.
How Do You Know if a Property Has a Lien in Wisconsin?
Typically, homeowners are aware if their property has a lien in Wisconsin. However, lenders also list Liens by recording them with the Register of Deeds office in the county where the property is located. They are prime public records and available to anyone who requests them, usually for a fee.
What is a Tax Lien in Wisconsin?
In Wisconsin, a tax lien is a type of involuntary lien placed on a person's assets for failing to pay a federal or state tax. Federal tax liens, issued by the Internal Revenue Service (IRS), are legal claims placed on tax debtors' properties in Wisconsin. The Wisconsin Department of Revenue issues tax liens or warrants on delinquent taxpayers. State tax liens include property taxes, income taxes, and business taxes payable to the state government. These tax liens (warrants) are filed with the court clerk, and the records of the amount owed by debtors are public. As such, debtors may not obtain credit or sell their assets. Federal tax liens issued to claim debtor's assets can be sold by the IRS to cover tax arrears.
What is a Mortgage Lien in Wisconsin?
A Wisconsin mortgage lien is the first lien on real estate. This gives the creditor who issued the mortgage loan the right to claim the house if the mortgagor defaults. Mortgage loans provided by credit institutions are used to secure real estate. In the process, the lender (credit institution) automatically has a claim (mortgage lien) over the real estate until the borrower completes the payment. Generally, the credit institution may divide the debt into small installments to help the debtor meet the repayment agreement. However, the court may impose the lien if the debtor fails to meet the repayment conditions. This means the credit institution can claim the debtor's property to cover the debts.
What is a Mechanics Lien in Wisconsin?
As contained in Wisconsin Statutes § 779.41, Wisconsin mechanics' liens ensure that contractors, builders, workers, building material suppliers, sub-contractors, and construction workers are paid for their services before liquidation or bankruptcy. Mechanics' lien makes it difficult for debtors to sell assets until workers are settled. Note that contractors and workers in Wisconsin, who may have signed a lien waiver with a consumer, cannot place a lien on the consumer's property.
Eligible workers must file a mechanics' lien within six months of the project's completion day or last delivery date of goods. The State of Wisconsin requires contractors and subcontractors to send a Preliminary Notice at the beginning of the project. This will preserve their right to file a mechanics' lien if the consumer fails to pay.
The construction worker is also expected to file a Notice of Intent to Lien before filing the mechanics' lien. This will be sent to warn the customer that a mechanics' lien will be placed on their property if payment is not made.
The significant difference between a mechanics' lien and a property lien is that the former is involuntary while the latter needs the debtor's consent to put up a property as collateral. Furthermore, a mechanics' lien is only placed on the property the contractor worked on or goods provided, while a property lien is placed on any property used as collateral.
What is a UCC Lien?
The Uniform Commercial Code was created to harmonize all commercial and business transactions in every U.S. state, including Wisconsin. In Wisconsin, lenders often file a UCC lien, also known as UCC-1 filing or UCC financing statement, to publicly announce a lien on a loan given to a borrower. With the UCC lien filed, the lender may sell the borrower's collateral without repayment. Generally, the UCC lien is created to protect creditors from losing money to debtors who default on payment.
In Wisconsin, UCC liens can be filed online or through designated UCC agents in each county. The Wisconsin Department of Financial Institutions provides lenders with an online platform for filing a UCC lien online. New lenders are required to create a user account to use the online platform.
What is a Judgment Lien?
A Wisconsin judgment lien is a form of civil action that grants people who won a court judgment the right to claim the losing party's (debtor's) real properties. Judgment liens are involuntary since they result from a court judgment issued because a debtor failed to meet a contract's requirements. Judgment liens in Wisconsin should be registered with the clerk in the county where the debtor already has real estate. According to Wisconsin Statutes § 806.15, a judgment lien is attached to a debtor's asset for ten years. Factors like bankruptcy proceedings and other liens on the asset may affect the creditor's ability to receive debts under a judgment lien.
Voluntary Lien Vs. Involuntary Lien in Wisconsin?
In Wisconsin, voluntary liens (or consensual liens) exist when the legitimate property owner surrenders an estate as a promise for a debt or service. Examples of cases involving voluntary liens are personal loans, corporate loans, and other contractual arrangements. Debtors risk losing properties given as collateral if a violation of the agreement occurs.
Involuntary liens are claims made by other entities on assets as security for recovering debts. An involuntary lien is non-consensual because, irrespective of the debtors' approval, a lender has the right to take the debtor's assets. Following the seizure of assets, an involuntary lien eventually settles the debt issue between a lender and a debtor.
The debtor's consent is the main difference between a voluntary lien and an involuntary lien. Furthermore, involuntary liens often require court enforcement to ensure that the asset is confiscated, while voluntary liens do not require the need for compliance.
How Do I Check for Liens in Wisconsin?
When buying a house or other property, it is essential to find out if there are any liens on the title. Liens are monetary claims against real estate by creditors who have provided goods and services directly to the homeowner to occupy and maintain their property. Liens can be satisfied by having payment made directly to them through their lien resolution program, or they may be purchased by third parties such as investors who then track down and attempt to recover funds from the debtor.
Wisconsin State Law provides that all actions taken recording documents affecting title to real property must be "acknowledged" before a notary public.
To check whether there is a lien on the title of a piece of real estate, requesters can search online using third-party service providers. Liens will typically show up on the report they provide and other information about the property. Liens can also be checked by contacting the municipality directly.
Title companies typically run a lien search, so this service's fees are built into their closing costs. Property buyers should ask to see the title commitment, including all recorded liens and encumbrances.
How Creditors Collect Payment Through a Lien
Creditors can collect payments through liens in Wisconsin by enforcing it. A lien can be enforced through a court order, but this is not always an option due to rarely used laws. "The Department of Financial Institutions is authorized by Wis. Stat. section 218.07(4) to enforce liens and offer creditors their debt by foreclosure or through filing a civil action against the debtor. A person with a lien can also collect money from the sale of property belonging to the debtor as long as the property is not exempt from liens under state law. Still, again many liens do not allow for liens to be enforced through a civil action unless it is a foreclosure. Debts collected using liens include delinquent child support, past-due taxes, and court-ordered restitution. There are even laws to protect people holding liens from losing money if the debtor declares bankruptcy before the lien is paid. There are also liens that can be filed for other miscellaneous debts, but these liens are not always enforceable without a court order.
How Do I Get a Lien Removed in Wisconsin?
Property liens are meant to protect creditors against debtors whose properties have liens on them, but sometimes creditors place liens on the wrong property or fail to remove liens that should be removed.
Lienees are usually allowed to remove liens within one year of their creation, but some Wisconsin courts do not require liens to be removed after this time.
Eligible persons can remove a lien in Wisconsin by following the procedure outline:
If a lien has been placed against the property in error, the lienee must find out who is responsible for the error.
The lienee may hire an attorney to get liens on real estate removed from your property to aid the process. However, the petitioner is advised not to pay more than $200, or 10% of the amount owed, until liens are settled.
The lienee must then link a letter with a request that the lien be removed and provide payment records showing that the amount owed has been paid to the creditor named on the lien. The petitioner must query the lien and attach a copy of the lien notice. Petitioners must include their name, property address, the amount owed, and why it is incorrect or unjust. Requestors must then mail copies of all correspondence to the creditor, the court where liens are filed, liens on real estate, and government agencies responsible for liens.
How Long Does a Lien Stay on Your Property in Wisconsin?
According to the provisions of Wisconsin state law, Liens will remain attached to a debtor's property for up to ten years if it is unpaid or unserviced by the debtor. However, if the lien expires, the creditor may opt to reinstate it by filing a court order for its renewal.
How to Avoid a Lien in Wisconsin
To avoid any chance of getting their property liened, home or real estate owners are advised not to take loans that would be unserviceable or generally cumbersome. However, if the party is already in debt, the way to avoid a lien on their property would be to pay off creditors, file for bankruptcy, or remove lien rights through court action.