Your bank account or other property can have either a lien or a levy against it to satisfy a debt such as back taxes owed to the IRS or property taxes owed to your town.
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.
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.
Not every lien or levy gets reported to the credit bureaus, but if any are, it will drive down your credit score.
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.
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.
State laws dictate how a lien or levy is put in place and require that you be notified in advance.
- Image by Flickr.com, courtesy of Andrew Magill