How does a lien foreclosure work?

A lien foreclosure is a legal process that allows a lien holder to enforce their claim on a property due to outstanding debts. When a lien is placed on a property, it typically indicates that the property is collateral for a borrower’s debt. If the borrower defaults on this debt, the lien holder can initiate foreclosure proceedings.

In this process, the lien holder can sell the property through a legal procedure to recover the amounts owed. The sale is generally conducted through an auction, where the highest bidder, which can also be the lien holder themselves, can acquire the property. This ensures that the lien holder can recuperate their financial losses while also officially removing the borrower's claim to the property.

This process is distinct from forgiving a debt, settling disputes, or negotiating terms, as it specifically involves the sale of the property to satisfy the right of the lien holder under the law.