Federal Tax Liens in Foreclosure
In a mortgage foreclosure, if the owner being foreclosed on has federal tax liens filed against him, will the property remain subject to all or a portion of the federal tax liens once a foreclosure sale is completed?
My assumption is if the property goes above opening bid, the mortgage company as first lien holder is paid off, and the Fed as 2nd/3rd recoups the rest, so I would take free and clear of the federal tax lien, but his tax debt would be reduced and he would remain liable.
@Anthony Cross There is a process to go through to get the IRS to release the property however I don't believe it is automatic in a foreclosure. Any good foreclosure attorney would know the process.
Even in junior position, the IRS has 120 days for redemption. They will only do so if they determine the amount paid at foreclosure was substantially less than fair market value.
As @Ned Carey mentioned, there is a procedure to request they release their redemption right.
Thank you both!