Tax Lien Foreclosure


DEFINITION of 'Tax Lien Foreclosure'

The sale of a property resulting from the property owner's failure to pay tax liabilities. A tax lien foreclosure occurs when the property owner has not paid the required taxes, including property taxes and federal and state income taxes. A statutory lien is first placed against the property of the person who has failed to pay taxes. The government that is owed the taxes (for example, the federal government in the case of unpaid federal income, self-employment, gift or estate taxes) will move to repossess the property in an attempt to recover the debt.

BREAKING DOWN 'Tax Lien Foreclosure'

Properties that are foreclosed due to nonpayment of taxes are deemed tax lien foreclosures. Tax liens can be specific liens against specific property, such as with property taxes and special assessment liens. Tax liens may also be general liens against all property of the defaulting taxpayer, such as with federal or state income tax liens. Tax laws prevent the the former resident of the property (who failed to pay taxes) from bidding at the auction.

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