What is the difference between a lien and a levy?

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Understanding the difference between a lien and a levy will help you determine the steps needed to resolve the issue. Both liens and levies are ways to collect an outstanding debt, but a levy is more serious than a lien. In both scenarios, creditors get legal rights to your personal property to repay the debt. You lose control of some or all your personal property.

Lien

The general difference between a lien and a levy is that a lien is a legal claim over your assets to meet a tax debt. A levy is a legal seizure of your property.

In reference to a tax lien, the Internal Revenue Service (IRS) will attempt to collect any unpaid taxes by attaching a lien to your property. If the property sells, the proceeds from the sale will be granted to the IRS over any other creditors.

The IRS will file a Notice of Federal Tax Lien which lets other creditors know that the government has a legal right to your property. Since this notice is a public record, it may be included in your credit report, therefore affecting your credit score. You have the right to appeal this notice.

Levy

A levy is also used to collect overdue taxes. But, it also allows the IRS to actually take your property to pay the debt. A tax levy is a more severe step in collecting taxes. The IRS will issue a Final Notice of Intent to Levy, and you have 30 days to file an appeal.

If you do not meet this deadline, r do not settle with the IRS, they can begin to levy your bank accounts. Unlike a lien however, an IRS levy is not public record, and should not affect your credit score.

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