Ohio Tax Liens

When you have an outstanding balance with the IRS, you may find yourself with a lien over your property. These types of tax liens are nearly impossible to get rid of without simply paying outright, leaving individuals with few options going forward.

Tax liens rest in the grey area of debt. While they are technically considered non-dischargeable similar to child support and alimony, there are certain situations where you can forgive your lien.

Due to the highly particular nature of liens, we strongly advise you speak to an attorney to get an accurate answer of what type of debt management is possible in your situation. As such, the following article is for information purposes only and reflects some of the more common ways a lien is affected by bankruptcy.

What is a Tax Lien

For the purposes of this page, when we discuss liens, we are going to be talking specifically about federal tax liens. While there are other varieties, this type is the one most individuals are concerned about.

When a lien is placed on your home, the government is claiming ownership to some of the value of your property as a way of collecting on past-due loans. This means that when you go to sell your home, some portion of your final sale proceeds are owed to the government as a way to settle your debts.

Unfortunately, this lien can create considerable challenge in selling your property. The reason being is that should you still fail to repay your debts, the government can potentially turn to the new owners and demand compensation from them.

Can Bankruptcy Eliminate Tax Liens?

For those who file Chapter 7 bankruptcy imagining they will eliminate their Lien, they are sometimes disappointed. More often than not, when you owe the IRS money, they are going to receive it one way or another.

This does not make bankruptcy useless, however.

Filing for Chapter 7 will eliminate your personal obligation to repay your lien, giving you more flexibility with payments and prohibiting the IRS from taking drastic measures such as wage garnishment.

To know if you are eligible for some repayment flexibility, the following criteria generally apply:

  • The taxes on which money is owed must be at least three years old
  • The taxes must have been filed early, in a timely manner
  • The tax debt must have been acquired at least 2 years before your bankruptcy filing
  • The IRS must have assessed this debt at least 240 days prior to your bankruptcy filing
  • The tax return is truthful
  • You were not guilty of tax evasion

Can Bankruptcy Help Repay Tax Liens?

One of the more common, and often more successful, ways in which bankruptcy can be used to fight a tax lien is by negotiating reasonable repayment. This is most common through filing a Chapter 13 claim and working your existing tax lien into your repayment plan.

However, understand that in the event you are not able to meet the demands of your Chapter 13 payments, any interest and penalties on your lien will be calculated retroactively, eliminating any financial benefit you gained from entering into the bankruptcy plan to begin with.

Contacting a Bankruptcy Attorney in Ohio

As someone who has been on both sides of the bankruptcy process, I am dedicated to helping individuals regain control of their debt. Contact us at 216-241-2510 to speak with a bankruptcy expert in Cleveland, Ohio.

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