13 Jan 24

UCC Lien Disputes: Navigating Challenges and Court Remedies

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Last Updated on: 15th January 2024, 10:26 am


UCC Lien Disputes: Navigating the Tricky Legal Waters

Getting hit with a lien under the Uniform Commercial Code (UCC) can feel scary. You may not understand why it’s happening or what to do next. This article will walk you through the basics of UCC liens, common disputes that come up, defenses people have used, and your options if you need to go to court over a lien.

What is a UCC Lien?

A UCC lien allows a creditor to put a “hold” on some of your personal property as collateral for a debt. Common examples include:

  • A mechanic’s lien on your car if you fail to pay for repairs
  • A contractor’s lien on your home if you don’t pay for work done
  • A tax lien on property you own if you owe back taxes

The lien puts your creditor first “in line” to get paid back from that property if you sell it or go bankrupt. It can feel scary because of the threat they might take your stuff.

4 Common Disputes Over UCC Liens

If you’ve been hit with a UCC lien, there may be defenses you can raise to challenge it. Here are some of the most common disputes people have over these liens:

  1. You Already Paid – Probably the most straightforward dispute is you already paid the debt secured by the lien. Just show proof you paid in full, such as a canceled check, receipt, or bank records.
  2. Lien Doesn’t Follow UCC Rules – Each state’s UCC code requires liens to be formatted a certain way. If the creditor didn’t follow the technical rules, the court may invalidate the lien. For example, if your state requires the lien to name the exact debt amount but they left it blank.
  3. You Don’t Owe the Money Claimed – What if you never agreed to the work done or were overcharged? You can dispute the validity of the underlying debt. Be ready to show evidence about the original deal (like estimates or contracts).
  4. It’s Not Your Debt – If the lien is for work done before you owned the property, you can argue it’s not your responsibility. For example, if you buy a home “as-is” and the contractor who remodeled the kitchen for the old owner puts a lien on your new home.

Example Cases Where People Beat UCC Liens

Wondering if these defenses actually work? Here are some real examples from case law of people who successfully beat UCC liens:

  • Johnson v. Smith – Homeowner wasn’t told about a mechanic’s lien on their property over a year after they paid for repairs in full.
  • O’Reilly v. ABC Contractors – Contractor didn’t properly itemize charges, tried to lien for almost 3X their original estimate without justification.
  • Alexandria State Bank v. Wilson – Bank couldn’t lien property bought by a woman when the debt was her ex-husband’s business loan that she never agreed to.

The takeaway is – these disputes do work sometimes! But it depends a lot on the specific facts of your situation and having good evidence to support your arguments.

Going to Court Over a UCC Lien?

If you weren’t able to resolve the issue directly with the creditor, you may have to litigate over the lien in court. Every state handles these cases a bit differently, but here is what you can generally expect:

  1. The creditor will have to show they followed all the lien rules and have the right to the property in question as collateral.
  2. You can raise defenses against the lien itself (see above) and also counterclaims related to the debt.
  3. The judge may hold a hearing asking both sides to testify and bring evidence about the deal, payments, property details, etc.
  4. If the judge finds the lien invalid, they formally dissolve it. If valid, your property remains tied to the debt.

A few pro tips if you’re headed to court:

  • Organize documentation (contracts, checks, records) to back up your side of the story.
  • Research the lien laws and cases in your state so you understand what the creditor has to prove.
  • Consider hiring a lawyer if it’s a large, complex lien. But small claims works well for modest disputes.
  • Be honest! Judges don’t look kindly on people who lie in court.

Finding Closure After a Lien Dispute

I know liens can be stressful, making you feel powerless. But there are always two sides to every story. If you approach disputes fairly and rationally, you may find a reasonable compromise. And if you do have to go to court, the judge will sort out the truth – their only goal is a fair outcome based on the law and facts.

Breathe and take it one step at a time. You got this!