What are Mechanic’s and Artisan’s Liens?
A Mechanic’s or Artisan’s lien is a legal tool available to those in the construction or car repair industry to ensure payment for their work or supplies. A Mechanic’s lien is typically used by contractors, builders, electricians, plumbers, roofers or landscapers when they have not received payment for home improvements or car repairs. They can take a legal claim against a home or real estate that they have worked to ensure the owner makes timely payments. An Artisan’s lien is a lien taken on personal property, most of the time vehicles, and often is a possessory lien. When a car repair is unpaid for the mechanic can retain the vehicle until payment is made and that is an artisan’s lien.
How does someone get a Mechanic’s lien or Artisan’s lien on my property?
A Mechanics lien typically requires paperwork to be filed with the district court clerk (or in some cases the registrar of deeds depending on the state you are in) in the county where the property is located within a specified time period (often 120 days) of the labor performed or supplies delivered to the real estate. The details and time periods vary from state to state and depending in some cases on what type of claim is being filed.
An Artisan’s lien is based on the work being done and possession of the personal property. Simple possession is good enough to enforce the lien. This means an auto mechanic generally does not have to return your vehicle unless they are paid.
What happens if I don’t pay the Mechanics lien or Artisan’s lien?
If you do not pay the Mechanics lien or Artisan’s lien, the creditor may start a foreclosure action. The creditor can get permission from the court to sell the home or vehicle. There are rules about what amount of notice must be given and the appropriate process, which differ greatly between a Mechanic’s lien and an Artisans lien, but your attorney can cover those items in detail if needed. Sometimes with a Mechanics lien the creditor does not take action, but the lien will still show up on the property title. If it is past the time for the creditor to take action, the property owner may need a court order to remove the lien from the title. If the lien is not removed it may be difficult to sell the property later.
There are some cases where there are storage liens that are similar to an artisan’s lien and by following certain procedures (advertising in a local paper) the creditor can have the property sold at auction to recover their fees.
How a Mechanics lien or Artisan’s lien are treated in bankruptcy.
If a contractor has a perfected Mechanics lien, they are treated as a secured creditor (the same as a car or home creditor) and are entitled to full payment, provided the property securing the lien has enough value to support the prior liens.
Example: Debtor has a first mortgage on the home and decides to make improvements to the home and employs a contractor for $15,000. The contractor performs the work and the debtor does not pay. The debtor then files bankruptcy and hopes to discharge the amount they owe the contractor.
Assuming the contractor has a perfected Mechanic’s lien, the contractor would be entitled to secured status, the same as the first mortgage lender. The debtor would be required to pay the full amount owed to the contractor under their Chapter 13 plan.
Caveat: If the home is worth $100,000 and the bank is owed $90,000 on their first mortgage, the contractor is only supported by $10,000 in value. Meaning, the contractor is secured for $10,000 and unsecured for $5,000.
An Artisan’s lien is also entitled to be paid as a secured creditor, and the value of the vehicle might limit how much of the lien must be paid. In certain cases you can force a turnover of the vehicle and make payments through a bankruptcy plan since you might need the vehicle to work and don’t have enough money on hand to pay all at once.
Mechanic’s liens and Artisan’s liens can be dealt with in bankruptcy. Normally you can do so by proposing a payment plan in a chapter 13 bankruptcy that will cover what is owed. Talk with one of our attorneys to see how your specific liens can be managed through bankruptcy.