Paralegal Advanced Competency Exam (PACE) Practice Exam

Which of the following describes a lien?

1. A form of temporary ownership

2. A right attached to a sold object until debt is paid

3. A type of property insurance

4. A legal barrier to property access

The correct answer is: A right attached to a sold object until debt is paid

A lien is correctly described as a right attached to a sold object until the debt associated with that object is paid. It represents a legal claim on an asset that gives the creditor the right to keep possession of the property until the debt is satisfied. This means that if a debtor fails to fulfill their payment obligations, the creditor has the legal authority to take possession of the property or force its sale to recover the owed amount. This concept is commonly seen in mortgages, where the lender has a lien on the property being financed until the borrower pays off the loan. Liens can also be applied to other types of property, such as vehicles or personal belongings, thus providing security to lenders or service providers. In contrast, other options do not accurately represent the nature of a lien. A lien is not a form of temporary ownership; ownership remains with the debtor as long as they meet payment obligations. It also is not a type of property insurance, which protects against loss or damage rather than securing a debt. Lastly, while a lien may restrict access based on the creditor’s rights, it is fundamentally a financial claim, not a legal barrier in the conventional sense.