Can an Individual Put a Lien on a Car? Here’s What to Know
Learn how individuals can legally place a lien on a vehicle, including key requirements, procedures, and how such claims are resolved.
While typically associated with banks or dealerships, individuals can sometimes place a legal claim, known as a lien, on another person’s car. This situation often arises from personal disputes involving unpaid debts, services performed, or private loans. Securing repayment this way involves specific legal procedures.
Understanding the rules governing these claims is crucial, as errors can lead to legal trouble or invalidate the lien.
Legal Grounds for a Personal Lien
An individual’s ability to place a lien on a car usually stems from unpaid debts recognized by law. One common path is obtaining a court judgment against the car owner for a specific sum. This “money judgment” confirms the debt. State laws often allow the person owed money (the creditor) to secure this judgment by placing a “judgment lien” on the debtor’s property, including vehicles. This transforms the court-recognized debt into a claim attached directly to the car.
Another way a lien can arise is through a mutual agreement, creating a “consensual lien.” This happens when two individuals enter a formal contract, typically for a loan, where the borrower uses their car as collateral. The agreement grants the lender a security interest in the vehicle. Such agreements generally must comply with state laws, often based on Article 9 of the Uniform Commercial Code (UCC), which sets standards for transactions where personal property secures a debt.
Statutory liens, which arise automatically by law under specific conditions, are less common for individuals than for businesses like repair shops. However, some state or local laws might permit a property owner to place a lien on a vehicle abandoned on their land, usually after following notification procedures, to cover towing and storage costs. The availability and details of these liens depend entirely on local statutes.
Required Documentation
Securing a lien requires specific paperwork that differs based on the lien’s origin. For a lien based on a court decision, the essential document is the official court judgment, often requiring certification from the court clerk. To attach this judgment to the car’s title, the creditor typically submits the certified judgment and state-required forms, such as a lien application, to the state’s motor vehicle agency.
If the lien results from a private agreement where the car is collateral, the core document is the written security agreement. This contract must be signed by the debtor and grant the creditor a security interest in the vehicle. Under the UCC’s Article 9, the agreement needs a description that reasonably identifies the car. Vague descriptions are usually insufficient. This signed agreement, along with a title application noting the lien and any fees, is submitted to the state’s titling agency.
Regardless of the lien’s basis, the process involves formally noting the lien on the vehicle’s certificate of title. This requires submitting the correct state application forms, providing precise vehicle details (VIN, make, model, year), and the names and addresses of the owner and the lienholder. Accurate completion and submission, along with fees, are necessary for the state to officially record the lien, making it part of the vehicle’s public record.
Steps to File
Formally placing a lien involves administrative steps handled by the state’s motor vehicle agency (often the DMV). For a judgment lien, the creditor might first record the judgment with a county office. Then, they submit proof of the judgment and a specific application to the vehicle titling agency, requesting the lien be added to the car’s title.
For a consensual lien from a private loan agreement, the process usually involves the lender submitting the required application forms and potentially the security agreement directly to the motor vehicle agency. This requests the agency add the lender’s name as a lienholder to the title record. Under UCC Article 9, noting the lien on the title typically “perfects” the security interest, establishing the lender’s rights against other potential creditors or buyers.1Nolo. How to Attach and Perfect a Security Interest Under the UCC
Interaction with the state motor vehicle agency is nearly always required. This involves completing state-specific forms, submitting them (sometimes with the paper title, though many states use electronic systems), and paying filing fees, which vary by state. The agency processes the application, verifies the information, and records the lien in its database, linking it to the vehicle’s identification number.
Enforcement Measures
A lien provides security but doesn’t automatically compel payment or transfer ownership. If the debt remains unpaid, the lienholder must take further legal steps to enforce their claim against the car.
For consensual liens under Article 9 of the UCC, enforcement often involves repossession after the debtor defaults. A creditor may sometimes retake the vehicle without a court order (“self-help” repossession) if they can do so without “breaching the peace.” This generally means avoiding force, threats, breaking into locked areas, or causing a public disturbance. Actions likely to provoke confrontation are typically unlawful.
If self-help repossession risks breaching the peace, or if the lien is a judgment lien, the creditor usually needs court intervention. For a judgment lien, this typically means obtaining a court order (like a writ of execution) directing law enforcement (such as a sheriff) to seize the vehicle.2Upsolve. Know Your Rights: Can a Judgment Creditor Take Your Car? This judicial process offers more legal protection but takes more time and money.
After seizure, the creditor must typically dispose of the vehicle to recover the debt. UCC Article 9 requires the sale to be “commercially reasonable” in every aspect, including method, time, and place. This generally means making good faith efforts to get a fair price. The debtor and any other lienholders must usually receive proper notice about the sale details.
Proceeds from the sale are distributed according to a legal priority, often detailed in UCC Section 9-615. Funds first cover repossession and sale expenses. Next, they satisfy the debt owed to the enforcing lienholder. Any remaining funds go to subordinate lienholders who made claims. If a surplus still exists, it must be returned to the former vehicle owner. If the sale doesn’t cover the costs and the primary debt, the creditor might pursue the debtor in court for the remaining balance (a “deficiency judgment”).
Termination of the Lien
A lien is terminated, removing the claim from the vehicle’s title, once the underlying debt is fully paid. Upon receiving final payment, the lienholder generally has a legal obligation to release the lien.
The lienholder typically provides the vehicle owner with documentation confirming payment. For consensual liens, this is often a formal lien release document. For judgment liens, the creditor usually files a “Satisfaction of Judgment” document with the court that issued the judgment, formally recording that the court-ordered debt is paid.
After obtaining the release or satisfaction document, the vehicle owner usually submits it, along with an application and any fees, to the state’s motor vehicle agency. The agency updates its records to remove the lienholder from the title. In states with Electronic Lien and Title (ELT) systems, the lienholder might notify the agency electronically, potentially triggering an automatic release and issuance of a clear title.
UCC Section 9-513 generally requires the secured party (lienholder) to file a “termination statement” once a secured debt is paid, formally ending public notice of the security interest, particularly for consumer goods like cars. Failure to provide necessary release documents promptly can sometimes allow the debtor to file the termination statement.
The goal is a clear title reflecting unencumbered ownership. This administrative step by the state motor vehicle agency is necessary for the owner to freely sell or transfer the vehicle without the resolved claim appearing on title searches.