Start by determining if the lien attaches to
Liens attach to assets in the
order in which they are perfected:
first in time, first in right.
That means if a tax lien is filed, it attaches to your assets
after (junior to) all other liens which have attached to the
property before the tax lien. For example, if your house is
worth $200,000 and the mortgage is $180,000, a properly filed
tax lien attaches to the $20,000 of equity available in the
property. Tax liens donít jump to the head of the line!
Tax liens are secured only to the extent that
there is value available to secure the lien. In the example
above, a tax lien for $50,000 is only secured for $20,000. The
$30,000 balance is unsecured.
The general rule is that liens pass through a
bankruptcy intact, unless some action is taken in the bankruptcy
proceeding to avoid the lien.
Is the tax referenced in the lien
dischargeable in bankruptcy?
If the tax is not a priority tax, or non
dischargeable because no returns were filed, the unsecured
portion of the lien is discharged in bankruptcy. The secured
portion of the lien survives the bankruptcy as a charge on the
property if you file Chapter 7; it may be good practice to get a
binding order on how much of the lien was secured at filing.
Secured tax liens are generally paid in full
through a Chapter 13 plan.
If the tax is not dischargeable, the lien
survives the Chapter 7 discharge as a charge on the pre petition
property and it attaches to property acquired after the
In Chapter 13, the lien does not attach to
property acquired after the bankruptcy is filed and the Chapter
13 plan should provide for payment in full of the priority tax,
such that the lien should be released upon completion of the