What Are Second Mortgages, Judgment Liens And Tax Liens In Foreclosure?
When foreclosure cases are filed it is common to see defendants other than the property owner.
Mortgage companies get title searches before filing a foreclosure. The title search will show entities that have liens on the property. Common additional defendants include junior mortgagees; Judgment creditors; and IRS tax liens.
These entities may or may not file appearances or file answers in the foreclosure.
Even if they file an appearance or answers these entities seldom offer bids at the judicial sale. The reason is simple: if they were the successful its bid would have to pay the first mortgage balance. Unless there is significant equity second mortgage holders will not bid at the judicial sale.
A Judgment lien is a type of nonconsensual lien (a lien that attaches to your property without your agreement). It is created when someone wins a lawsuit against you and then records the Judgment against your property.
The IRS routinely files tax liens. The lien is filed in any county that the IRS knows the tax payer has property.
The IRS frequently files tax liens on all tax debts going back as far as 10 years.
Although the IRS and judgment lien holders can bid at foreclosure sales they do not.
The consequence is that absent a Bankruptcy the homeowner or property still owes these entities money after the foreclosure. These entities: second mortgage holders, judgment lien holders and the IRS can use whatever legal means they have to seek to collect their debts.
HOW CAN I HANDLE THESE DEBTS AFTER A FORECLOSURE SALE?
The most practical means is to file a Chapter 7 if possible. Most IRS debts that are older than three (3) years are dischargeable in a Chapter 7.
The Second Mortgagee and/or the Judgment lien holder might possibly cancel the debt but then the homeowner or property owner is faced with the problem discussed above: receiving a 1099-C.
If one cannot file a Chapter 7 for one reason or another a Chapter 13 with a very low dividend might be the best solution.
For more information on 2nd Mortgages, Judgment & Tax Liens, a Complimentary consultation is your next best step. Get the information and legal answers you are seeking by calling today.