Federal Lien Removal process

4 Replies

I plan to bid on a property in a NJ (judicial sale) sheriff's auction that has a Federal Lien attached for IRS 1040 taxes.  This lien is junior to the foreclosing mortgagor, and will be wiped out.  The Government was correctly notified as a party in the original foreclosure complaint.

I understand there is a 120 redemption period for the Feds from the sale date.  I have scoured the 'net and not found anything (even on IRS site) as to the process for getting a formal Discharge of the Lien from the feds after the redemption period.

There has to be some way to Discharge that could be Recorded; otherwise, during a title search the Fed Lien would still show up and prevent me from selling the house.

Has anyone done this before who could opine on the details?

cheers

I know of some who had to negotiate IRS liens after tax lien auctions because they were advised that IRS liens do not go away that easy. However, (& although not exactly the same) last month we were taking back a property Deed-in-lieu-of that had a small $3,400 lien second to the note we held. To have it removed from title we negotiated a $500 payment to those holding the lien. This strategy negated the necessity of a high cost/ complete foreclosure per se. Thankfully the lien was all from one creditor.  We subsequently processed & filed the DILO & resold it without a 'clouded' title.

Depending on the amount maybe the IRS would be open to a similar token financial consideration.

good luck

Are you certain a junior federal lien gets wiped off? Is it because it's a general lien on real and personal property? Crazy

No need to get a formal release.  Title co.s understand the laws better than we do.  It's just like a junior mortgage that gets wiped out....ther's no release for the mortgage ever recorded, it's simply removed by "operation of law".

@Wayne Brooks is right, and you are right.  There is a right of redemption that is available to the IRS for a certain amount of time.  (The time is different from state to state)  

  1. In accordance with IRC § 7425, the Internal Revenue Service has the right to redeem real property which was sold in nonjudicial foreclosure action by a third party to satisfy an outstanding encumbrance which has a priority over the Notice of federal Tax Lien.
  2. In accordance with Title 28 U.S.C. § 2410(c), the Internal Revenue Service has the right to redeem real property which is sold in a judicial sale where the United States position is junior to the foreclosure party.
  3. The time period for a redemption after a foreclosure sale with respect to either a nonjudicial or judicial foreclosure is 120 days or the period allowable for redemption under State law, whichever is longer.

however, once the time has passed, as Wayne mentioned, it is automatically removed by "operation of law."