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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29535
Experience:  Taxes, Immigration, Labor Relations
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House sold tax lien in ny state what happens to the mortgage

Customer Question

house sold for county tax lien in ny state what happens to the mortgage on the property
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

The lien is the government’s legal claim against your property.

The lien protects the government’s interest in all your property, including real estate, personal property and financial assets

You still owe the mortgage for which the property is used as a collateral.

A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt. A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt.
If that is a real estate tax lien - and the country will levy and foreclose on the house - the house will be sold on the auction - and county taxes will be paid off - the rest will be used to pay off the mortgage and other liens - and if anything left - the check will be issued to the owner.

Customer: replied 1 year ago.
if they levied and sold at auction is the mortgage wiped clean or is the new owner responsible
Expert:  Lev replied 1 year ago.

That depends on situation...
The new owner will not be responsible unless he/she will specifically take such obligations - but the old owner might still be responsible.
If there is a balance - it woudl be up to the mortgage company to forgive that balance and issue form 1099C reporting cancellation of debt, OR

to collect the remaining debt from the borrower.

There are two types of debts: recourse and nonrecourse. A recourse debt holds the borrower personally liable. All other debt is considered nonrecourse.

In general, recourse debt (loans) allows lenders to collect what is owed for the debt even after they've taken collateral (home, credit cards). Lenders have the right to garnish wages or levy accounts in order to collect what is owed.
Some states have a law regarding nonrecourse debts - and at least 10 states can be generally classified as non-recourse for residential mortgages.
But NY is not a non-recourse state - so that will depends on how you negotiate with a lender.

Customer: replied 1 year ago.
If we live on s. But house is ny does that matter
Customer: replied 1 year ago.
Expert:  Lev replied 1 year ago.

The jurisdiction is based on the location of a real property.
If the property is located in NY - that state law will apply.