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Is it fraud to obtain a mortgage knowing IRS income tax lien was imminent?

Orlando, FL |

I've been audited in the past for several years of not paying taxes on business income and had 2 IRS tax liens against me. I remortgaged my home in December 2006 and paid $67,000 to IRS with some of the proceeds, tax liens were satisfied and released. At the time, there were other years I did not pay taxes and now have 3 new IRS liens totalling $40,000. I am now in defunct on my mortgage payments, upside down on value, and am facing foreclosure. Won't the bank have to pay my IRS liens off if they foreclose? I have two other loan/credit lien judgements against me and one pending. Will I still be liable? Did I commit fraud? If so, what can they do?

Attorney Answers 4


  1. Consult an attorney as soon as possible. If you consult a bankruptcy attorney make sure that this attorney has experience with potential fraud cases. In this situation, if there is evidence of fraud in the mortgage application, the matter may be referred from criminal prosecution.
    Good luck.
    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.


  2. Here is my 230 disclosure for the prior answer
    Circular 230 Disclosure: Pursuant to U.S. Treasury Department Regulations, I am now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. A taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.


  3. I don't believe what you have described is fraud. You may want to consider filing bankruptcy before the IRS files the new tax lien. You may be able to discharge the tax years in question depending on when you filed or when the taxes became due. I suggest you consult with a bankruptcy attorney right away! Good luck!

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. Answering this question does not create an attorney-client relationship or otherwise require further consultation.

    Circular 230 Disclosure: Pursuant to U.S. Treasury Department Regulations, I am now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. A taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.


  4. I agree with the prior attorney that this is likely not fraud. Fraud exists in the tax context when you willfully neglect to file taxes. That is not the case here. The only other instance of fraud could be that you sold real estate and did not give title "free and clear" of any liens (warranty of marketability) which is a civil action for damages, not a fraud action.
    The liens are not the biggest issue here, but rather your creditors. I agree with the prior two attorneys that you should consider consulting a bankruptcy attorney to determine the best way to pay off your creditors without harming your credit. Keep in mind that in bankruptcy, the IRS has a higher priority (i.e. they get paid first) over normal, unsecured creditors, but a bankruptcy attorney would best be able to advise you on how to proceed in such an action.

    Legal disclaimer: The above information is not legal advice and should not be relied upon as legal advice. No representations are made in the above communication nor may any information contained herein be used in a court of law as a representation upon which you may rely.

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