Lien Subordination
A lien subordination is the process of moving an IRS Tax Lien down a notch in the prioritization of claims against a piece of property. For example, if you own a house free and clear, and the tax lien is in first position against the house, you can’t obtain a mortgage against the house. No lender in their right mind is going to loan you money against that house unless their lien is going to take first position.
The answer to this problem is the lien subordination. Prodigy Financial can request that the IRS issue a subordination of their lien against a property if the lien that will be taking first position ahead of the tax lien will result in money going to your tax liability. If you need help obtaining a temporary removal of a Tax Lien due to a financial hardship or to refinance a property – Contact Us Today!
In the house example, obtaining a subordination of the tax lien in order to obtain a mortgage against the house will result in cash coming from that mortgage. At closing, that cash will go directly to the IRS, the mortgage will move into first position, and the tax lien gets re-recorded in second position. Remember, paying interest on a loan is almost always going to be cheaper than paying penalties and interest to the IRS.
There are other conditions where a lien subordination will still be approved, even if the IRS isn’t going to obtain direct proceeds from doing so. For example, many trucking companies will finance their accounts receivable through a process called factoring. In factoring, a lender pays the trucking company some percentage of their accounts receivable (usually 75% to 90%) up front, and then the lender takes the responsibility of collecting on that account receivable when it’s due, usually 30 to 90 days down the road. This way, the trucking company gets money now so that they can buy fuel and make payroll.
When a tax lien is filed, most factoring lenders stop funding. In that case, the trucking company suddenly loses all of its cash flow. In order to enable the funding to continue, a lien subordination can be obtained that move the tax lien to a position below the factoring lender, thereby protecting the lender’s claim on those accounts receivable.
If you need help navigating the Maze of the IRS bureaucracy – Contact Us Today! We specialize in Reducing and Resolving Back Tax Issues – Fast. Our Team of Enrolled Agents is specifically trained to help Reduce the Complexity of Tax Lien Situations. We Can Help!
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