Can you sell a house with a tax lien, an IRS lien, or a judgment against you in Illinois?

Every sale runs through the same machine. When the contract is signed, the title company searches the county recorder's records, the State Tax Lien Registry, and the court records for anything recorded against the house or against the owners by name: mortgages, tax liens, judgments, association claims, mechanics liens. Each one shows up on the title commitment as something that has to be paid or released before the buyer gets clear title.

For each lien, the title company requests a written payoff good through the closing date. At closing, the sale price pays those payoffs in their order of priority, then the closing costs, and whatever is left goes to you. You don't write a check to the IRS or the county at the kitchen table; the closing does it, and the recorded releases follow.

That's the whole mechanism, and it's why a lien by itself doesn't stop a sale. What can stop one is arithmetic: if the payoffs are more than the price, there isn't enough money to clear the title, and the sale waits on the lienholders. The three sections that follow describe how each kind of lien works, and the last section covers that case.

The IRS describes a federal tax lien as the government's legal claim against your property when you neglect or fail to pay a tax debt. It arises after the IRS assesses the balance, sends a bill, and you don't pay in time; the IRS then files a public Notice of Federal Tax Lien so creditors know. The IRS says the lien attaches to all your property, including real estate, personal property, and financial assets, and that a lien is not a levy: a lien secures the government's interest, a levy actually takes property.

The IRS lists four ways to get out from under it. Paying in full: the IRS says it releases the lien within 30 days after the tax debt is paid. Discharge: a discharge removes the lien from specific property, and this is the one that matters in a sale. Subordination: the lien stays, but another creditor is allowed ahead of the IRS. Withdrawal: the public notice comes off, but the debt remains.

For a sale, the tool is a Certificate of Discharge under Internal Revenue Code section 6325(b), which the IRS's Publication 783 says removes the United States' lien from the property named in the certificate. You apply on Form 14135, and the IRS asks that you submit the application at least 45 days before the transaction date that the certificate is needed, to allow time for review, determination, and the documents. The application wants the sales contract, a title report, the proposed closing statement, and an appraisal.

Publication 783 lists the grounds. One is that the tax is partially satisfied with a payment not less than the value of the United States' interest in the property, which in a sale means the IRS is paid out of the proceeds what's left after the liens ahead of it and the settlement costs. Another is that the government's interest has no value, because the debts senior to the lien are greater than the property's value or sale price. A third is an escrow agreement under which the sale proceeds are held in a fund subject to the IRS's claim. The publication says that under the payment ground you receive the certificate after the IRS receives the agreed amount, proof the taxpayer has been divested of title, and a copy of the final settlement statement; under the no-value ground, after that determination plus the same proof.

In practice the title company and your attorney run this: they order the payoff (the IRS lists 1-800-913-6050 for the amount owed), prepare the discharge application with the contract and settlement figures, and the closing is set for after the IRS's conditional commitment letter arrives. If the application is denied, the IRS says you receive its collection appeal forms with an explanation. We don't predict what the IRS will decide, and nobody honest will.

Illinois income tax works much like the federal lien at the start: the Income Tax Act says that if a person liable for tax neglects or refuses to pay after demand, the amount with interest, penalties, and costs is a lien in favor of the State on all property and rights to property, real or personal, belonging to that person, arising when the assessment is made. The Department has 3 years from the date the assessment is final, or from a return filed without payment, to file a notice of lien, or the lien created by the assessment terminates.

Where the notice goes is what changed in 2018. The State Tax Lien Registration Act gives Illinois a single statewide system for the Department's lien notices, the State Tax Lien Registry, a public database the Department maintains and that anyone can search by name or lien number at no charge. The Department may file a notice of tax lien in the registry within 3 years from the date of the final tax liability. Once filed, the lien is perfected and attaches to the debtor's personal property anywhere in Illinois and to real property in the county or counties the notice names. It lasts 20 years from filing unless the Department releases it sooner, and the registry controls over any county's records.

Release follows payment. The Retailers' Occupation Tax Act's lien section says that when a lien has been satisfied and the taxpayer has paid the filing fees for the lien and its release, the Department issues a release of lien and files it in the registry. The Department's own page says a lien remains for 20 years or until you pay it off, whichever comes first, and it warns that even after a debt is paid, your credit report may keep showing the lien until a release is recorded.

For a sale, the Department's Lien Unit is the contact for a payoff amount or a lien release: Lien Unit, Illinois Department of Revenue, PO Box 19035, Springfield, IL 62794-9035, phone 217-785-5299, email REV.Lien@illinois.gov. The title company requests the payoff; the lien is paid at closing; the release is filed in the registry. Illinois has no published short-payoff program equivalent to the IRS discharge that we could cite; if the state's lien exceeds what the sale can pay it, that is a negotiation your attorney or CPA has with the Department, and its outcome is the Department's.

A court judgment against you is not, by itself, a lien on your house. The Code of Civil Procedure says a judgment is a lien on the real estate of the person it's entered against, in any county, only from the time a transcript, certified copy, or memorandum of the judgment is filed in the office of the recorder in the county where the real estate is located. A credit-card judgment, a contractor's judgment, a judgment from a car accident: each becomes a lien on the house only when the creditor records it, and the title search is what finds it.

The lien has a life. The Code says no judgment shall be enforced after 7 years from the time it is rendered, except upon revival by the proceeding the Code provides, with a one-year tail for real estate levied on inside the 7 years. The creditor can foreclose the lien the way a mortgage is foreclosed, with a 6-month redemption period from the sale; the Code says the real estate homestead exemption applies. Whether a given judgment is still enforceable, revived, or expired is a question for your attorney, who reads the court file; the title company will treat anything recorded as a cloud until it's released or shown to be unenforceable.

The homestead exemption is the Illinois rule that matters most here. The Code gives every individual an estate of homestead in the property they occupy as a residence, exempt from attachment, judgment, levy, or judgment sale for the payment of their debts, up to a dollar limit the statute sets, with a separate limit for two or more owners. When a homestead is conveyed, the Code says the conveyance doesn't subject the premises to any lien it wouldn't have been subject to in the owner's possession, and the proceeds, up to the exemption, are exempt from judgment for one year after you receive them, longer if reinvested in a new homestead. In plain terms, the exemption can shield part of the proceeds from a judgment creditor; whether it applies to a particular judgment at a particular closing, and how much it shields, is your attorney's call. Child support judgments are treated differently by the Code and can be enforced at any time.

At closing, a judgment lien is paid like any other: the title company gets a payoff from the creditor's attorney, pays it from the proceeds, and records a release or satisfaction. If the creditor's claim is more than the sale can cover, the creditor decides whether to take less, and your attorney makes the ask.

None of the above is the county property tax. Unpaid property taxes are a first lien on the house under the Property Tax Code, superior to other liens, and they're collected through the county's tax sale and redemption system, not through the recorder or the registry. If that's your situation, our page on how to sell a house with unpaid property taxes in Illinois covers the tax sale, redemption through the county clerk, and the tax deed auction. The mechanics at closing are the same: the title company gets the redemption figure and pays it from the price.

Sometimes the payoffs are bigger than any price the house can bring. When that's the case, a sale to us doesn't work: we buy when the price covers the payoffs, and we don't buy when the liens add up to more than the house is worth. Clearing the title in that situation means each lienholder agreeing, in writing, to accept less than it's owed or to release, and that is between you, your attorney, and each creditor.

The paths exist, and they aren't ours. The IRS has a published discharge process, including a ground for when the government's interest has no value. The Department of Revenue has a Lien Unit you can ask. A judgment creditor is a private party who can say yes or no. Your attorney, or a CPA for the tax liens, is the person who makes those requests, and a HUD-approved housing counselor can help if a mortgage is behind as well. We don't know what any creditor will accept, and nobody honest will tell you they do.

If the creditors do agree to amounts that fit inside a price, the picture changes: the payoffs then fit, and a sale works the way the next section describes. Until then, the honest answer from a buyer is no, and we'd rather say it on day one than a week before a closing that can't happen.

We buy houses as they stand, and liens are paid at closing like any payoff. It starts with the address, who's on title, and what you know is recorded against you: tax notices, a judgment, a mortgage. Then one walk-through, and a written offer: price, earnest money, who pays which closing costs, and a closing date that allows for whatever the title company finds.

Then the title search. If it turns up more than you expected, we'll tell you what it shows; the title company gets the payoffs; your attorney handles any discharge or release request. If the payoffs fit inside the price, the closing goes ahead and the liens are paid and released. If they don't, we'll say so plainly, because that isn't a sale we can make; your attorney and the creditors decide what happens next. Our page on selling a house when you're behind on the mortgage covers the payoff and lender side when the mortgage is late too.

Bring every notice you've received to the first conversation, including the ones you haven't opened. A lien that surprises the title company a week before closing costs more time than one we knew about on day one.