When a tax lien is thrust upon you what are you to do? What happens in this situation? What is a tax lien? Many people understand the basic concept of a home foreclosure due a delinquency on mortgage payments, but many people are not aware of what can happen when property and income taxes are failed to be paid. In such a startling and dire situation what can what expect?
A tax lien is simply a legal way in which different government entities can ensure that unpaid taxes are in fact paid, including interest and associated fees due to the lateness of the payments. When a tax lien is placed upon a property the owner cannot transfer the title to another individual nor can they offer it up for collateral, it is essentially a frozen asset.
If the property that is having a tax lien attached to it is financed then the mortgage company can pay the taxes. They will often due this to avoid a high risk situation. When a tax lien is on a property that they have loaned money on these companies risk losing them should a tax foreclosure take place.
Once the financers have paid off the tax lien debts the owner then must pay them back. The company sets up an escrow account and charges them monthly until their debt is paid. On top of that they charge a monthly fee for the future property tax payment, so that each year the correct amount (or close to it) is saved up. If property taxes increase or decrease an adjustment will be made to the next years taxes to make up for it or a refund will be issued. This is something that can be worked out and that the owner can have a bit more of a say in though.
When people don’t pay their income taxes the government also has the right to seize their property. They start by placing an ordinary tax lien on the property and then if needed can continue on by selling the property at a tax deed auction or by selling a tax lien certificate to investors.
If you don’t even want to bother just let the government seize the property for good and sell it via a tax deed auction or tax lien certificate. However, if you just take the time to learn a few things about finances and prepare for your annual payments avoiding a tax lien is easy as pie.
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