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Federal Tax Lien Priority: Over Your Mortgage?

Federal Tax Lien Priority: Over Your Mortgage?

by: Anthony Parent

Yesterday, a customer asked us if there were a scenario by which a Federal Tax Lien concern would ever be greater than a mortgage that is existing. Although we thought that as a question of public policy that the Federal Tax Lien concern never ever would, we thought it absolutely was a fantastic chance to talk about federal income tax liens and exactly how it works pertaining to formerly recorded liens and mortgages.

1. So How Exactly Does Federal Tax Lien Priority Work?

A concern lien, after charges and home fees, are liens which have ‘priority under federal law’, such as for instance mortgages along with other asset that is secured.

Perhaps it doesn’t help much, so think about liens a a deck of cards. The Ace may be the greatest. That might be very first home loan. In the event that you have second home loan, that 2nd home loan is the King. In the event that IRS filed a tax that is federal, that might be the Queen. Then assume a hospital filed a judgment lien — that might be a Jack.

2. Why do lenders worry about concern?

In other words, lenders desire to be paid back. In a court if they are not, they want to be able to recover what is owed to them.