Tax Liens Always Win

On the topic of judgment recovery, when your debtor will or has owned real estate

property; recording a lien, and the priority of liens can be important. A plan is that if there is sufficient equity in your debtor's real estate, you are paid if their real estate is sold or refinanced. Most of the time, however not always, the first to record a lien prevails. My articles are my opinions, and is not legal advice. I am a judgment broker, and not an attorney. When you ever need a strategy to use or legal advice, please contact a lawyer.

The "first to record a lien wins" phrase means a lien that is filed first chronologically, is the lien having a superior rank compared to competing liens. Senior liens and superior liens mean the same. Presuming that all liens remain valid, it usually does not matter if the competing liens are a mortgage lien, mechanics lien, or a judgment lien, etc., the first properly filed lien is most often superior.

When a debtor's property is sold with a Sheriff's or foreclosure sale, any money pays the senior lien first. If a superior lien holder forecloses a real estate, the junior liens can be washed out when there is not enough equity available to pay them. When there is equity leftover, others having recorded liens on their judgment debtor's property will get paid by priority, until the cash runs out.

If you hold a property judgment lien on a person or entity, it makes sense to check the county recorder records for all other liens, to determine for certain if your lien is superior or not. This may become important when the sale of the debtor's property will not bring enough money to pay off the remaining lien holders. If a judgment debtor dies, often their burial and last illness costs are taken from off the top, before lien holders get anything.

Sometimes the first who records doesn't always win. Laws concerning liens on property varies for every state. In certain states, for example Florida, lenders seem to always prevail, even if they lend money after another lien holder has recorded and perfected a lien. Some states, including Florida have unlimited homestead exemptions for a property a judgment debtor lives at, so no matter what lien you get recorded there, it might not do much.

If a taxing authority holds a lien on a debtor's property, it is usually senior to all others. Federal tax liens might sometimes even attach to a homesteaded property in debtor-friendly states. An interesting PDF article about this topic is at: http://recenter.tamu.edu/pdf/1110.pdf

In most situations and states, some kinds of debtor assets, for example bank accounts, wages, and personal property; the existence of general tax liens isn't always important, because the first to levy usually wins. Of course, if you had the Sheriff levy the income of a debtor, a government taxation authority, or a child support creditor or an agency for them; could push aside and outrank a typical judgment owner's levy. However if the child support or tax-related entity doesn't make any levy actions, the regular judgment creditor's levy will go ahead, and might work.

by: Mark Shapiro

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