A junior lien is a security interest on a property that is subordinate to another security interest. The prioritized security interest is called a senior lien and paid back in full prior to payment of the junior lien. If the debtor becomes insolvent, then the junior lien will only receive payment once the senior lien has been paid back in full. A lien can be both junior in respect to an older lien and senior in respect to a newer lien.
Generally, the priority of lien is determined by the “first in time” rule with the date of the recording of the lien determining priority. An exception to this rule can be made by statute, especially for federal and state tax liens.
If a senior lienholder brings an action for foreclosure against the property holder, the junior lienholder must be made party to the action or their rights will not be extinguished at the end of the case.
[Last updated in June of 2023 by the Wex Definitions Team]
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