What is a Personal Injury Settlement Lien?

A personal injury settlement can be paid many different ways. When the party responsible for payment is without funds to do so, it is still possible for the injured party to receive compensation. To obtain the money owed to him, however, by virtue of a settlement lien.

A Lien Defined

A lien is a court created right to property or other assets owned by a party responsible for paying compensation to another individual. Attachable assets include bank accounts, investments, homes, automobiles and other personal property. Many states have laws that exempt the owing party’s main residence from liens.

The Process of Creating a Lien

A lien can only be created by a court after a hearing. The trial in which one party was granted a remedy of money must have already concluded and its judgment entered. Additionally, the owing party must have failed to pay, possibly multiple times depending on state laws.

The party that has not received payment to which it is entitled must file a complaint stating that he has not been paid and that the other party has assets to which a lien can attach. The exact nature of the attachable assets does not need to be identified at this time. The court then provides the owing party a chance to respond and, after that time, will hold a hearing on the complaint. If the judge finds that the owing party has, in fact, not paid on the settlement, he will determine that a lien is appropriate.

Next, the judge will require the owing party to identify all his assets. This record will be submitted to and reviewed by the court and a lien created on one or several of them, depending on the amount owed.

The Effect of a Lien

A lien creates a property right in the holder. This means that the owing party may not dispose of or derive funds from the property without any money’s created going to the individual entitled to the settlement money.

A lien holder has the right of first refusal on the sale of assets. If the owing party decides to sell a piece of property which is subject to a lien, the lien holder has the right to accept or reject the offer for sale. Depending on the size of the settlement, all or some of the money derived from the sale will be delivered to the lien holder.

Getting Legal Help

If you are involved in settlement litigation involving a lien, seek legal assistance. A lawyer will detail the rules pertaining to liens in your state and advise you about how to proceed with your claim or defense against the lien.

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