IRS Liens on your home in bankruptcy

  • Tim 

Can the IRS force a sale of your house if you file bankruptcy? This simple answer is probably not. However some aggressive bankruptcy trustees are using IRS liens to force a sale of your home.
For the longest time bankruptcy attorneys thought the bigger the IRS lien on your property the more it was protected in bankruptcy. The theory was that if there was no equity in the home the bankruptcy trustee wouldn’t sell the property. Unfortunately some bankruptcy trustees have figured out a way to create equity in real estate with IRS liens.
Under the bankruptcy code a bankruptcy trustee can wipe out liens if they are for penalties. So the bankruptcy trustees are using this provision to wipe out the penalty portion of an IRS lien, then using the newly created equity to ask the bankruptcy court to sell the house. The worst part is it is working.
If you have a home and are afraid you are going to have to file bankruptcy you really need to discuss your situation with an attorney who is familiar with all the nuances of the bankruptcy code. If they are writing a will at 10, doing a personal injury case at 12 and handling a divorce at 2, they may not be the best choice for you.