Everywhere I’ve looked this week, new bankruptcy lawyers are struggling with client tax liens. Here’s my list of basics you need to know about federal tax liens.
- Tax liens create a secured claim in favor of the taxing authority. That claim incurs interest at the statutory rate.
- Exemptions, bankruptcy or state, are not effective against tax liens, which are statutory liens.
- Tax liens survive a Chapter 7 discharge on the assets the debtor held at filling.
- If the tax which the lien supports is discharged, the lien does not attach to post petition acquisitions.
- If the value of the collateral is less than the tax owed, the balance of the tax debt can be either priority or unsecured, depending on the facts.
- Liens are satisfied from assets in the order they are perfected; there may be a lien that is not an allowed secured claim because the value in the debtor’s assets is already committed to a senior lien.
This is obviously just a summary of the subject. Develop a facility with tax issues, however, and you will stand out among bankruptcy practitioners.
If this area intrigues you, Morgan King’s Discharging Taxes in Bankruptcy is essential.