A tax lien is a lien that is imposed by the law upon a property in order to secure that taxes will be paid. Normally, a lien is placed on a home when the owner has not been able to pay due taxes owed on the real or personal property concerned. The IRS can also issue a lien if the owner of the property has not been able to pay income tax or other taxes. When you file for bankruptcy in a tough economic time, it will affect your tax liens. No matter whether you file for Chapter 7 liquidation or a Chapter 13 repayment plan you will need to give up assets and liberties in exchange for the filing. Unfortunately, some tax debts will remain regardless of your bankruptcy. Tax liens are one of those debts. You cannot discharge these expenses by filing, like you can discharge consumer debt or some creditor debts.

If you choose a Chapter 7 bankruptcy and have tax liens, then the court will liquidate all of your viable assets before they discharge your debts. Unless your tax lien is it may be discharged. Unfortunately, unsecured tax liens are rare. All secured tax liens, like those that are attached to your home, will stay in place throughout the entire bankruptcy. If you can’t pay them off, then the IRS still has the ability to seize your property as payment or obtain the profit of selling the property. If you can pay the taxes that are owed, then the IRS may release the lien. Anything left after satisfying the lien is the debtor’s to keep when starting a new life.

If you file for a Chapter 13, it will change the way that you handle your tax liens. In this bankruptcy procedure, you will need to work out your finances into a stringent payment plan and stick to that plan successfully. Normally, a Chapter 13 repayment plan can last 3 to 5 years. In this case, you would need to pay your secured tax liens off as one of your debts before the plan ends. After the plan ends, if you have paid the entire debt your lien will be released. In order to obtain protection from a tax lien in a Chapter 13 you must prove that you have paid taxes for the previous four years. This is to ensure the IRS that you aren’t trying to cheat them out of the money that they are rightfully due. When you use a Chapter 13, the IRS may choose to drop interest charges in order to receive the money that you owe them in a faster manner.

If you have a dispute over a tax lien, then heading to bankruptcy court may be the fastest way to resolve the argument. Maybe you were under the impression that a lien was unsecured, but the IRS is insisting that it is. Maybe you thought that the IRS would drop the interest charges on your debt but they are maintaining that the interest charge is necessary. If you have any concerns, talk to your bankruptcy attorney about them and start developing and argument that can be discussed in the courtroom. Sometimes, the IRS offers taxpayers an “offer in compromise” which you may be able to work through. In most cases, this is a strict plan where you pledge to pay any excess income past the costs of living to your tax lien debt in order to secure your property and eliminate the debts. If you want to take this offer of compromise, make sure to talk with a bankruptcy attorney today. Finances can be complicated, so you will want a lawyer who is familiar with this area of law to help you out. Contact an attorney near you today for help with your money and debt matters!