Voluntary Lien

See: Lien.

Gina was skeptical when Jason asked to borrow $500 from her, even though he promised to pay it back within two months. She was about to say no, but then he sweetened the deal: if he didn’t pay her back within two months, as agreed, then she could have his original oil painting of N*SYNC, which has been valued at $575. She loves that painting and thinks it would look ahhh-mazing over her fireplace (baby Justin Timberlake, so cute), so they wrote up the agreement, signed it, and stuck it in a drawer. This is what’s known as a “voluntary lien.” It’s a claim that someone has on someone else’s property if a debt between them isn’t paid, and it’s accepted and recognized by the owner.

Voluntary liens are used in real estate, business finance, personal lines of credit, and, yes, even in the world of N*SYNC fine art. The actual rules and regulations vary based on what type of voluntary lien we’re talking about, but the basics remain the same: we can’t sell something that’s being used as lien collateral, we can’t say our collateral is worth a lot more than it is just to offset our debt, and we can’t renege. As much as it would break Jason’s heart to lose his fave painting, if he doesn’t get Gina the money he owes her according to the terms of their agreement, then the painting goes to Gina.

Bye bye bye, painting.