Your monthly mortgage repayments take a
huge chunk off your monthly income and it goes on for like an eternity. As if
it’s not enough, you one day receive a notice stating the IRS’s claim on your
property in the form of a Federal Tax Lien as you failed to pay all your tax
debt. Now both your creditors and the government are after you. You feel sick
at the thought of losing your home, but your current financial situation is
making everything a struggle. What should you do?
You can get out of that sticky situation
by possibly having your home refinanced and applying for subordination with the
IRS. Refinancing is basically taking on another loan to pay your existing
creditors. With a lower interest rate, you’ll spend less on monthly mortgage.
The excess money or savings can be used to pay off other debts—the tax lien in
this case.
“But
how will I be approved for a loan when the lien is still reflected in my credit
report”?
Indeed, the tax lien will cause your
credit score to nosedive, but you can recover by applying for subordination.
Basically, if IRS files a lien against your home, their claiming rights precede
that of your creditors. Through subordination, however, the IRS agrees to get
in line behind your mortgage lender, allowing you to pay the latter first to
improve your credit rating and secure refinancing. All refinance proceeds goes
to your tax debt and the IRS still retains first rights in case of foreclosure.
In such cases, you’ll do well to consult an IRS tax lawyer.
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