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Lawsuits Can Turn Into Liens

Tax Liens

"When I say that 80% of people do nothing, and by procrastinating, they are allowing their non-secured creditors turn debt into secured debt through lawsuits. Once a judgement is reached, immediately they will begin to lien the equity in your home. Don't let this happen to you. If someone had told me this earlier, I would have lost so much less."

Important to Know: What is Secure Debt

This is the debt that follows you like a baby blanket, until it is completely worn down.

  • Student loans

  • Government debts like taxes, fines or penalties

  • Child support and alimony

  • Expensive items purchased right before filing bankruptcy like cars, boats, or jewelry

  • Secured creditors on real estate

When you file for bankruptcy, creditors have to stop any effort to collect money from you, at least temporarily. Most creditors can’t write, call or sue you after you’ve filed. They can only file a claim in your bankruptcy as a creditor. However, even if you declare bankruptcy, the courts can require you to pay back certain debts. Each bankruptcy case is unique, and only a court can decide the details of your own bankruptcy. 

What is a tax lien?

A tax lien is a lien imposed by law upon a property to secure the payment of taxes. A tax lien may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.

The Difference between a Federal Tax Lien and an Administrative Levy
The creation of a tax lien, and the subsequent issuance of a Notice of Federal Tax Lien, should not be confused with the issuance of a Notice of Intent to Levy under 26 U.S.C. § 6331(d), or with the actual act of levy under 26 U.S.C. § 6331(a). The term "levy" in this narrow technical sense denotes an administrative action by the Internal Revenue Service (i.e., without going to court) to seize property to satisfy a tax liability. The levy "includes the power of distraint and seizure by any means. The general rule is that no court permission is required for the IRS to execute a section 6331 levy.

In other words, the federal tax lien is the government's statutory right that encumbers property to secure the ultimate payment of a tax. The notice of levy is an IRS notice that the IRS intends to seize property in the near future. The levy is the actual act of seizure of the property.

In general, a Notice of Intent to Levy must be issued by the IRS at least thirty days prior to the actual levy. Thus, while a Notice of Federal Tax Lien generally is issued after the tax lien arises, a Notice of Intent to Levy (sometimes misleadingly called simply a "notice of levy") generally must be issued before the actual levy is made.

Also, while the federal tax lien applies to all property and rights to property of the taxpayer, the power to levy is subject to certain restrictions. That is, certain property covered by the lien may be exempt from an administrative levy (property covered by the lien that is exempt from administrative levy may, however, be taken by the IRS if the IRS obtains a court judgment).

How do you know if you have a Tax Lien?
To find out if there's a lien on your property, you can contact the IRS Centralized Lien Unit at (800) 913-6050.

Does a tax lien affect Credit Score?
Tax liens, or outstanding debt you owe to the IRS, no longer appear on your credit reports—and that means they can't impact your credit scores.

Can you sell your house with a lien on it?
Even if the debt exceeds the property value, you can still sell a house with a lien on it. You don't have to pay these settlements before closing—liens against houses can be paid in multiple ways. Traditionally, a seller will pay these debts at closing where the debts are deducted from the proceeds of the sale. If they exceed the equity in the home, most likely a deal will need to be struck with the creditor.

Can someone put a lien on my house without me knowing?
Involuntary liens can happen without notice depending on the situation. Most commonly, a creditor will place a lien against your property after it sues you and wins the case. This is known as a judgment lien.

Who can place a lien on your home?
As a general rule, before a creditor can put a lien on your home, they must get a court judgment against you. A judge must decide that you actually owe the money and that the creditor has the right to try to collect it from you.

So don't procrastinate. Start planning for the most successful plan possible, considering your options carefully. Give me a call.

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  • Lawyer referrals to those specializing in Ch. 7. vs. Ch. 11 vs. Ch.13

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  • Estate Liquidation

  • IRS & Tax accounting 

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Well, I have to say that without Bill, I don't know how we would have made it through. Bill helped us find a private lender to refinance our home due to a lawsuit that turned into a lien on our home. We were being forced to sell, and there was no stopping this creditor. Bill, you are a savior.

Richard Hampton

My home had a tax lien from some back property taxes that we just could not afford to pay. I was really worried that our property would have trouble getting sold at a good price - but not only did Bill get us the best value, but he was so easy to work with.  

Ruth B.