How to Handle a Tax Lien on Your House & Bank Account

So, you have just found that a debt collection agency has seized your bank account and taken the money you owe them. The news leaves you shocked and your bank account overdrawn. This can be an extremely worrying scenario. And the worst thing is that collection agencies are well within their rights to do this. You absolutely must learn how to handle a tax lien should it arise.

What Is a Tax Lien?

Creditors and collection agencies use what is called a lien. They will either seize assets or prohibit the sale or transfer of property if a debt remains unpaid. You may not be able to stop or reverse a lien. But you can take steps to rebuild your credit and protect other assets from the same fate.

What Can Creditors Seize Under a Lien?

When a lender raises a judgment against you, they can take one of several routes to take the money that is owed. The lender can:

  • Seize assets and personal property: The lender will need to subpoena local credit unions and banks to locate any bank accounts that you own. The creditor then has the power to freeze assets or take the money that you owe. Even if this leaves you overdrawn. In some cases, the lender may also try to take other personal property. This could include a boat or vehicle if it covers the value of your debt.
  • Raise a lien against property you own: If you own your own home or any other piece of real estate, the lender could place a lien on this property. You will not be able to sell or transfer your property until the lien is paid in full.
  • Take your wages: Creditors can also legally take 10 percent of your income to put towards your debt. This is called garnishment. If you have more than one creditor garnishing your wages they may only take a maximum of 25 percent of your gross income between them.

What You Can Do to Handle a Tax Lien

Fortunately, there are a number of things you can do to protect yourself from a lien and rebuild your credit. Start by protecting your income. If your paycheck is paid directly into your seized bank account, stop it immediately. You need money to survive, and there is a chance that your entire paycheck could be seized leaving you high and dry.

You should also obtain a copy of your credit report and speak to a reputable credit counselor. Knowing your rights and what to do next will help you to overcome the stress and uncertainty that a lien can create and get back on the road to a healthy credit history as quickly as possible.


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