An important statutory lien is the federal tax lien. Once the government assesses a tax, the amount due constitutes a lien on the owner’s property, whether real or personal. Until it is filed in the appropriate state office, others take priority, including purchasers, mechanics’ lienors, judgment lien creditors, and holders of security interests. But once filed, the tax lien takes priority over all subsequently arising liens. Federal law exempts some property from the tax lien; for example, unemployment benefits, books and tools of a trade, workers’ compensation, judgments for support of minor children, minimum amounts of wages and salary, personal effects, furniture, fuel, and provisions are exempt.
Local governments also can assess liens against real estate for failure to pay real estate taxes. After some period of time, the real estate may be sold to satisfy the tax amounts owing.
KEY TAKEAWAY
There are four types of nonconsensual liens: (1) court-decreed liens are attachment liens, which prevent a person from disposing of assets pending a lawsuit, and judgment liens, which allow the prevailing party in a lawsuit to take property belonging to the debtor to satisfy the judgment; (2) mechanics’ liens are authorized by statute, giving a person who has provided labor or material to a landowner the right to sell the property to get paid; (3) possessory liens on personal property allow one in possession of goods to keep them to satisfy a claim for work done or storage of them; and (4) tax liens are enforced by the government to satisfy outstanding tax liabilities and may be assessed against real or personal property.
EXERCISES
- The mortgagor’s interests are protected in a judicial foreclosure by a court’s oversight of the process; how is the mortgagor’s interest protected when a deed of trust is used?
- Why is the deed of trust becoming increasingly popular?
- What is the rationale for the common-law possessory lien?
- Mike Mechanic repaired Alice Ace’s automobile in his shop, but Alice didn’t have enough money to pay for the repairs. May Mike have a mechanic’s lien on the car? A possessory lien?
- Why does federal law exempt unemployment benefits, books and tools of a trade, workers’ compensation, minimum amounts of wages and salary, personal effects, furniture, fuel, and other such items from the sweep of a tax lien?
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