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Understanding tax liens: types of tax liens

On Behalf of | Nov 5, 2021 | Tax Liens

A tax lien is a lawful declaration on an individual’s property or a business. If you owe taxes, a lien could be placed on your property to stand in as a guarantee that you will pay back the owed amount.

Let’s explore the different categories of tax liens.

Property tax liens

A property tax lien is a legal claim on your property for overdue taxes. A property with a tax lien can’t be sold or remortgaged until the debt is cleared. This is the first move to let you(the taxpayer) know that action has been taken, leading to the seizure of your vehicle, real estate, and bank accounts.

Liens for child and spousal support

Upon divorce, the committal parent pays an agreed amount to the custodial parent as child support until the offspring is of age or emancipated. The custodial parent can file for a lien on the committal parent’s property for failure to pay child support.

Spousal support is the same as child support. In case of failed alimony payment, the ex-spouse could file a lien against the other’s personal or real property. Both child and spousal support liens can affect a retirement account, savings account, investment account or even real property.

Judgment tax liens

A judgment lien, also known as an involuntary lien is where the lender is given rights to your property by the court when you fail to pay your debts. For example, if Mr. Owen, a restaurant owner, takes a loan from Bank XYZ and falls behind on payments due to low business, the bank will obtain a judgment lien against Mr. Owen’s assets. This includes Mr. Owen’s car, house and any other assets he owns to help settle the loan. Should he fail to pay back the loan within the stipulated period, the assets will be sold to recover the debt. 

What is the statute of limitations on tax liens?

The 10-year statute of limitations gives the IRS 10 years from the date the tax was assessed to collect unpaid tax debts. After this period, the debt record is erased and dismissed by the IRS. 

Failure to pay your tax debts doesn’t mean you’ve lost your property for good. You can take advantage of the six-month redemption period offered to most people by Massachusetts, under General Laws, to update amounts owed and keep your property.

In instances where the home is abandoned by the debtor or if the redemption amount is more than the value of the property, then there’s no redemption period. The sale of the property begins immediately.



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