Understanding How to Eliminate the Tax Lien in Bankruptcy

Protecting Yourself from a Lawsuit with Bankruptcy

Understanding How to Eliminate the Tax Lien in Bankruptcy

When you go through the process of Chapter 7 bankruptcy, you might be feeling scared and confused about the outcome of your case. You chose Chapter 7 as a way to get rid of some of your debts and start with a clean slate. If there is a tax lien against your property, you will most likely be unable to remove it through the Chapter 7 bankruptcy process. However, you should know that there are exceptions to this rule.

Tax Liens and When They Are Imposed

To understand how you can eliminate a tax lien, you must first understand what they are and how they work. A lien is formally known as a type of security interest against certain property that you own. For instance, if you own your home and you have a mortgage, this is considered a lien. If you don’t pay your monthly mortgage payment, your creditor can sell the property to be reimbursed for what you owe them. This can be a frightening prospect because nobody wants to lose their property.

Understanding How to Eliminate the Tax Lien in BankruptcyWhen you file for Chapter 7 bankruptcy, there are some things that you should know about the validity of the tax lien. For instance, if a tax lien notice was filed before your bankruptcy, the tax lien will continue and there is a chance that it will move forward, putting your property at risk. If, however, the tax lien was imposed by creditors after you filed for Chapter 7, there will be a stay, as you are offered certain protections when it comes to bankruptcy. Nobody will be able to take action against you when it comes to liens and you will continue forward with your bankruptcy.

Taking Charge Against the Tax Lien 

The first thing to note is that you should never attempt to discharge a tax lien on your own, but instead turn to the experienced help of an attorney. If the IRS or any other taxing authority has already recorded the lien before you file for bankruptcy, there is a good chance that the lien will move forward and that you will not be given grace when it comes to getting rid of it, which might force you into a difficult position. However, with the help of a bankruptcy attorney, there a few grounds in which you can challenge the tax lien:

  • Pointing out that the IRS did not record the lien and that you first filed for bankruptcy;
  • The lien was recorded while the stay was put in place;
  • The lien was recorded in the wrong county or against the wrong property; and/or
  • The lien is older than ten years at this time.

Of course, one of the best ways to get rid of a lien is to pay the taxes you owe in full if you are able to, but, if you are filing for bankruptcy, there is already a good chance that you do not have this money upfront. So, instead, you can attempt to contact the taxing authority and ask them to put you on a payment plan, if you believe you will be able to keep up with your payments over time.


We understand that many parts of bankruptcy can be stressful at M.J. Watson & Associates, where we have handled bankruptcy matters for a wide variety of clients. If you are going through the process of Chapter 7 bankruptcy and you have questions about liens or any other related matters, we want to help you through this difficult and complex time in your life.

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