This paper discusses issues regarding silent liens and bankruptcy trustees.
Under Federal tax law, if a taxpayer neglects or refuses to pay a tax after demand, the tax (including any interest, penalty, and costs) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to the taxpayer. This is the well-known proverbial “silent tax lien” as it requires no recordation or even separate notice to the taxpayer to be effective, and is generally unknown to anyone except the IRS and the delinquent tax payer. The effect of a silent lien under the Bankruptcy Code has produced interesting litigation and problems for bankruptcy trustees. Under the Bankruptcy Code, a silent lien is a statutory lien, and are addressed specifically under the Trustee avoidance provision in section 545, the preference provisions of section 547(c)(6), and the distribution provisions of section 724(b)(1). The paper further discusses what deference or effect must be accorded to these silent liens by a trustee in bankruptcy.
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