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.
After paying off the taxes the lenders require back payments through the use of an escrow account. These accounts can help prevent the attachment of a tax lien to your property, because they ensure that a monthly amount of your mortgage payment goes towards paying off the taxes at the end of the year. Those whose homes are not financed would be wise to put away to find an average figure to save each month so that their taxes are not such a huge hit on their monthly budgeting when they get their tax bill.
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.
Avoid a tax lien like you would he plague by preparing ahead of time and understanding what can cause you to get a tax lien in the first place. By doing this there will be no lump sum payment surprises and you will be debt and tax lien free in any economy.