According to the Wall Street Journal (paywall), the 3 credit bureaus are going to have more strict requirements for when a tax lien or judgment appears on someone’s credit report.
Starting shortly, the credit bureaus will only show a tax lien or civil judgment if the civil judgment or tax lien has your:
- Name and address
- Either your birth date or last 4 digits of your Social Security number
Before this change, the credit bureaus only needed two of these three pieces of information to include a tax lien or judgment.
This change is a result of a 2013 government settlement that aimed to make credit reports more accurate for people.
This is a technical change, but it is good news for the credit ratings of people who have judgments and tax liens that are unsupported by detailed information, and also for people who have common names or mixed credit profiles.
Making sure that our clients have good credit after bankruptcy is one of our most basic goals.
WHAT IS A CIVIL JUDGMENT?
In Minnesota, a civil judgment is a court order saying that one person or company owes money to another person or company.
Most of the judgments that I deal with come from debt collection.
If someone owes money for long enough, then a debt collector, bank, or credit card company will go to court and sue the borrower.
Unless the borrower can prove that the debt is past the statute of limitations, or that they paid it off or don’t owe the money, then the creditor will be successful in court and get the judgment.
A judgment sounds very scary, and it is.
- It allows the creditor to take 25% of the borrower’s paycheck and also to take money out of the borrower’s bank account.
- One of the big reasons to file bankruptcy is that bankruptcy stops judgments
If the creditor has a judgment already, then the bankruptcy voids the judgment and means that the creditor immediately loses the power to use it for anything.
If the creditor is trying to get the judgment, then the bankruptcy means that they must dismiss their case and they never get the judgment.
- Stopping and voiding judgments is one of the main reasons that people file bankruptcy in Minnesota
WHAT IS A TAX LIEN?
If a person does not pay their Minnesota or Federal taxes for long enough, then the government will put a tax lien on that person.
Tax liens are liens against everything the person owns.
If there is a tax lien against you, then the government will take the back taxes out of the sale proceeds of a a house or any other substantial asset that a person sells.
Chapter 13 and Chapter 7 bankruptcy can often help with a tax lien.
How bankruptcy works with a tax lien is a complicated legal issue that depends greatly on:
- What type of property you own
- What kind of taxes you owe
- How old the taxes are
If you have a tax lien, then you should talk with a lawyer about what the tax lien means.
Walker & Walker Law Offices, PLLC offers free consultations to figure out your bankruptcy options for dealing with taxes and tax liens.