6 Basic Points About Tax Liens in Bankruptcy

tax liens bankruptcy

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.

More on taxes

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The Calendar Tax Trap

Taxes and the Means Test