Noncontemporaneous Creation of Debt and Lien in Utah

Lien and Debt in Utah Arising at Different Times

Even though the ultimate enforcement of a lien is predicated on the existence of a debt at the time of enforcement, the lien and the debt could arise at a different time and could be created by separate agreements or legal events.  It can be very useful to have some types of transactions that can have debtor and creditor rights created separately or successively.  It can also create unique legal problems as well concerning bankruptcy in Utah.

Unsecured Debt can Later be Secured

When a debt is originally created, it may be unsecured.  Later on, before the debt is paid, it may become a secure debt.  For example, it happens when parties make a later contract where the creditor is granted a security interest to secure the preexisting debt.  It could also occur through no action by either the creditor or debtor such as by a statute or the judicial process.

The debt will be enforceable as secured debt as long as the security was created before the time for enforcement has arrived.  If a third party acquired rights in the indebted property during the period of time between creating and securing of the debt, the rights of that third party could be superior to the security interest.  The delay in securing the debt could also have consequences when the debtor goes through bankruptcy.

Lien Created in Anticipation of Future Indebtedness

A debtor and lender can establish a relationship where money or credit is provided by the creditor in the future.  It may be convenient for parties to create a lien in property at the beginning of the transaction when the parties envision a long-term relationship and a line of credit is provided when the debtor needs it.  Of course, the lien is not enforceable until the creditor actually releases funds or credit to the debtor, but as soon as the debt arises, it will be secured by the preexisting lien.  When a line of credit is provided, each future advance will be secured by the lien.  The creditor is protected by this arrangement  and avoids the inconvenience of having to create a new security interest every time an advance is made.

Utah Bankruptcy Attorneys Help Debtors

If you are a debtor who created a lien because of unwise future expectations, call a Utah bankruptcy lawyer from Salcido Law Firm.  An attorney from Salcido Law Firm will evaluate your situation and help you determine if bankruptcy is the right choice.  Call a lawyer today at 801.413.1753 for a free consultation.

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