Is IRS tax debt considered secured or unsecured debt?

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Is IRS tax debt considered secured or unsecured debt?

Tax lien on property would be secured but if IRS garnishes wages or does a bank levy are they considered secure or unsecured debt.

Asked on August 6, 2010 under Bankruptcy Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You are mistaken debt for the mechanism used to recover it.

The debt is the judgment against you for unpaid taxes, as well as possibly interest and penalties. It is an unsecured debt, though it is also one that is not dischargeable in bankruptcy--i.e. it's a debt that ulimtimately, you are going to have to pay.

Garnishment of wages or bank accounts, or a lien on property, are mechanisms used to collect on a debt when the debtor does  not voluntarily pay.

The secured/unsecured differentiation only matters (1) if the creditor is attempting to foreclose on or repossess property securing a debt, or (2) in bankruptcy--though as noted above, the underlying tax debt is generally not dischargeable in bankruptcy anyway.


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