It is a bit confusing, but one thing is clear--unless you want to sell your home, there is no need to do anything. Do not be stampeded. Do not feel any necessity to "end this quickly" The sub is trying to spook you with this lien. Ignore it. force him to hire an attorney and file suit to foreclose the lien. If he has no case, he may not be willing to do that, and might not be able to find a lawyer to help him. In the meantime research this guy. Find out if he is licensed. I assume that in IN there is a requirement that he must be or he may not record a lien or file suit. If he does file suit and is licensed, then you are going to have to hire an atty. But there is no point rushing into that.
Now, your contract is with the general contractor and what you seem to be missing is that the GC is responsible for the work of the subs. HE is also generally responsible to keep your home lien free by paying his subs what is due to them. So, you need to tell your GC to read the sub the riot act and get rid of the lien or you are going to withhold from the amount due to him enough to cover the lien plus interest and attorneys fees.