How To Put A Lien On A Business

If a business that owes you money has been unsuccessful, one option is to place a lien on the assets of the business. As a lienholder, you gain legal rights to the company’s property, as well as the authority to sell the property.

Steps To Placing A Lien On A Business

Before placing the lien, you must seek a judgement against said business in court. Once the lien is in place, you can use the proceeds from selling the property to begin repaying what you are owed. To place a lien against a business, follow the steps outlined below.

Step 1. Provide Proof Of Debt

The first step of the process is demonstrating that you have a valid debt that has yet to be paid by the property holder. One example of this is a contractor or subcontractor who has yet to receive pay from a business.

In such a case, the bill for the cost of labor and receipts for the materials used are all evidence of the owed amount. If you, for instance, have performed legal or accounting services for a business, your hourly billing statement is sufficient enough to prove the debt.

Step 2. File A Court Claim

You must have a court order (a judgement) directing the debtor to pay what is owed prior to placing a lien. After filing the claim with the court and submitting proof of debt, the business needs to answer and explain why the debt is not valid.

The court will then grant your request if there is no evidence to show the debtor does not owe the amount in question, entering a judgement in your favor.

Step 3. Entering The Judgement

Following the court’s judgement in your favor, you must file that judgement so the public is put on notice of your claim against the business property. Make sure to identify the company’s assets, such as real property. This inventory is typically required of the debtor during the court proceedings.

Step 4. Sale Of Property

Once the lien is in place and business assets are attached, you now have the legal right to seize the assets and sell or otherwise apply the proceeds to satisfy said judgement. In some cases, this process is done through auction or a sheriff’s sale.

All proceeds will be applied to the outstanding debt until it is repaid fully. If the unpaid amount remains, the judgement can then be applied and liens can be placed against other assets.