Business & Finance Personal Finance

Lien vs. Levy

    Lien

    • A lien is a legal claim against property that can be put in place to make sure that a debt is paid. Banks put liens on homes that are lifted when the mortgage is paid off or if the home is sold.

    Levy

    • If you owe taxes, the IRS or tax assessor can remove (levy) funds from your bank account to satisfy the debt. Garnisheeing of wages is another form of levy.

    Your Credit

    • Not every lien or levy gets reported to the credit bureaus, but if any are, it will drive down your credit score.

    IRS

    • According to Kiplinger, the IRS may impose a levy on your bank account or wages or a lien on your property for back taxes. You can avoid disruption by working out an installment plan with the IRS.

    Other Triggers

    • A lien or levy can be put in place if you are behind on child-support payments, owe money on a loan or owe medical bills.

    Notice Required

    • State laws dictate how a lien or levy is put in place and require that you be notified in advance.

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