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IRS Tax Lien Removal |
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Foreclosure
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Tax Lien
Foreclosure
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Foreclosure is the legal
proceeding in which a bank or other secured creditor sells or
repossesses a piece of real property (immovable property) due
to the owner's failure to comply on its promissory note. When
the process is complete, it is typically said that "the lender
has foreclosed its mortgage or lien."
In the United States, there are two sorts of foreclosure in
most common law states. Using a "deed in lieu of foreclosure,"
the bank claims the title and possession of the property back
in full satisfaction of a debt, usually on contract. In the
proceeding simply known as foreclosure (or, perhaps,
distinguished as "judicial foreclosure"), the property is
exposed to auction by the county sheriff or some other officer
of the court.
Many states require this latter sort of proceeding in some or
all cases of foreclosure, in order to protect any equity the
debtor may have in the property, in case the value of the debt
being foreclosed on is substantially less than the market
value of the immovable property (this also discourages
strategic foreclosure). In this foreclosure, the sheriff then
issues a deed to the winning bidder at auction. Banks and
other institutional lenders typically bid in the amount of the
owed debt at the sale, and if no other buyers step forward
they get title to the immovable property in return.
Mortgage Companies
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Other states have
adopted non-judicial foreclosure proceedings, in which
the mortgagee, or more commonly the mortgagee's
attorney, gives the homeowner a legally specified notice
of the default and the mortgagee's intent to sell the
immovable property. In this "power-of-sale" foreclosure,
if the homeowner fails to cure the default, or use other
lawful means (such as filing for bankruptcy which
provides a temporary automatic stay to the foreclosure
proceeding) to stop the sale, the mortgagee or its
representative will conduct a public auction in a
similar manner as the sheriff's auction described above.
The highest bidder at the auction becomes the owner of
the immovable property free and clear of any interest of
the former homeowner but may be subject to any liens
superior to the mortgage being foreclosed eg. a senior
mortgage, unpaid property taxes etc. The buyer may need
further legal action to obtain actual possession of the
premises.
"Strict foreclosure" is an equitable right available in
some states. The strict foreclosure period arises after
the foreclosure sale has taken place and is available to
the foreclosure sale purchaser. The foreclosure sale
purchaser must petition a court for a decree that will
cut off any junior lienholder's rights to redeem the
senior debt. If the junior lienholder fails to do so
within the judicially established time frame, his lien
is cancelled and the purchaser's title is cleared. This
effect is the same as the strict foreclosure that
occurred at common law in England's courts of equity as
a response to the development of the equity of
redemption.
In most jurisdictions it is customary for the
foreclosing lender to run a title search of the
immovable property and to name all other persons who may
have liens on the property, whether by judgment, by
contract, or by statute or other law, so that they may
appear and assert their interest in the foreclosure
litigation. In all US jurisdictions a lender who
conducts a foreclosure sale of immovable property which
is the subject of a federal tax lien must give 25 days'
notice of the sale to the Internal Revenue Service:
failure to give notice to the IRS will result in the
lien remaining attached to the immovable property after
the sale.
As of September 2005, there are roughly 85,000 homes in
foreclosure in the United States.*
Perfecting a lien is an important part of the task of
protecting the secured creditor's interest in the
property. A perfected lien is valid against bona fide
purchasers of property, and even against a trustee in
bankruptcy; an unperfected lien may not be.
Retrieved from
"http://en.wikipedia.org/wiki/Lien"
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site is dedicated to TAX LIENS. The information
is derived from believed to be reliable government sources
and is not meant to be legal advice. |
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