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Dealing with Bogus UCC Lien Filings

Getting hit with a fake Uniform Commercial Code (UCC) lien filing can be scary and frustrating. UCC liens give creditors a security interest in your property, so a bogus one can wreak havoc on your finances and credit. The good news? There are ways to fight back and protect yourself. This article will walk you through what to do step-by-step.

What is a UCC Lien?

First things first, a quick UCC refresher. The UCC is a set of state laws about commercial transactions involving personal property (not real estate). Under the UCC, creditors can put a “lien” on your property to secure repayment of a loan. This gives them rights over the property if you default.
Legitimate UCC liens are a normal part of getting financing to start a business or buy equipment. But scammers exploit the UCC system by putting false liens on people’s property. This is usually done out of spite or to extort money. The liens themselves are fake – there is no actual debt or loan agreement behind them.

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Common Types of Bogus Liens

While any property can get hit with a fake UCC lien, the most common targets are:

  • Homes
  • Cars/vehicles
  • Bank accounts or other financial assets
  • Small business equipment, inventory, etc.
See also  Do UCC Liens Expire? When and How They Terminate

Scammers also frequently file bogus liens against government officials like law enforcement officers, attorneys, and judges. This is done to intimidate or get revenge for some kind of perceived wrong, even if the target wasn’t directly involved.

How to Tell if a UCC Lien is Fake

Fake liens can look convincing on the surface. The scammer goes through the proper legal filing process, so at first glance it appears legit. Here are some red flags to watch for:

  • You have no outstanding loans or debts related to the property
  • The creditor name on the lien is unfamiliar or suspicious
  • The lien amount seems arbitrary or unrealistic
  • Multiple liens get filed in a short time period
  • The filer has a personal grudge or dispute with you

If any of those apply, you likely have a bogus lien on your hands. The next steps are disputing the lien and getting it removed.

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Disputing a Fake UCC Lien

Every state has a process for challenging questionable liens. The exact details vary, but there are general guidelines to follow:

  1. Get a copy of the lien filing from your Secretary of State’s UCC office. Review the specifics like the property and filer.
  2. Send a “demand for release” letter to the filer. Explain that the lien is fraudulent and must be terminated.
  3. If they don’t release it, submit an “Affidavit of Wrongful Lien” along with a “UCC Termination Statement.”
  4. Notify credit bureaus and any affected banks/lenders that the lien is disputed.

The filing office usually can’t verify the legitimacy of liens, but they can remove ones shown to be fraudulent. It’s also wise to consult a lawyer to make sure you take the proper legal steps. They can provide templates for the affidavit and guide you through nuances in your state laws.

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Suing the Lien Filer

In addition to terminating the fake lien, consider suing the scammer who filed it. All states have laws allowing victims of fraudulent liens to recover civil damages, such as:

  • Out-of-pocket costs for disputing the lien (legal fees, lost wages, etc.)
  • Compensation for emotional distress or reputational damage
  • Punitive damages to punish the filer

Damages can add up to thousands or even tens of thousands of dollars. And the threat of a lawsuit works as a deterrent against future fake liens. It makes scammers think twice before targeting someone else.

Criminal Charges for Bogus Lien Filers

In the most extreme cases, fake lien filers face criminal fraud or extortion charges. Laws like 18 U.S. Code § 1521 specifically prohibit false lien filings when attempting to:

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  • Harass or intimidate government employees
  • Influence court proceedings
  • Retaliate against law enforcement
  • Defraud banks or creditors

Punishments can include thousands in fines and years in federal prison. However, criminal cases tend to focus on anti-government filings rather than ordinary citizens. Most scammers see civil penalties as enough deterrent against targeting private individuals or businesses.

Preventing Future Fake Liens

Here are some steps you can take to guard against additional fraudulent liens down the road:

  • Put a UCC protection statement on file. This requires filers to provide proof of debt.
  • Monitor your credit reports regularly for signs of new liens.
  • Maintain contact info for your state UCC office for quick response to any new filings.

While rare, some determined scammers try hitting victims with multiple fake liens over time. Stopping the first one quickly helps deter future filings.

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See also  Using UCC Liens in Equipment Financing and Leasing

The Earlier You Act, the Better

As scary as surprise UCC liens can be, just remember that remedies are available. Fraudulent liens may be a headache, but they can be overcome by acting promptly to terminate and dispute them. Don’t delay taking action, and consider legal counsel to protect your rights. With a level head and the law on your side, the mess can usually be cleaned up.

References

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