Can You Get Equipment Financing With a Tax Lien or Bankruptcy?

You can often get equipment financing with a tax lien or bankruptcy on record, though the answer depends on the lender, the status of the lien or the case, and the paperwork you bring. Equipment deals have one feature most borrowing lacks: the machine you're buying secures the debt, and the IRS's own manual treats a properly documented purchase-money lender differently from other creditors. This guide covers the federal rules as of October 2026, with a landscaping example.

Can you get equipment financing with a tax lien or bankruptcy on record?

In many cases, yes. None of the federal sources we read for this guide sets a waiting period for a private equipment loan after a tax lien or a bankruptcy, so each lender writes its own policy. The right-hand column below describes market practice.

Why the collateral changes the tax lien conversation

The IRS files a public document, the Notice of Federal Tax Lien (NFTL), "to alert creditors that the government has a legal right to your property" (IRS, reviewed September 14, 2026). The same page says a lien attaches to all of your assets "and to future assets acquired during the duration of the lien." A lender therefore asks who ranks first on a machine you buy next month.

Under 26 U.S.C. 6323(a) (checked October 6, 2026), the lien isn't valid against a holder of a security interest until the IRS files that notice. For a lender that arrives after the filing, the Internal Revenue Manual describes the agency's position: "While the Internal Revenue Code does not give a PMSI priority status, pursuant to Rev. Rul. 68-57, 1968-1 C.B. 553, the IRS recognizes that a PMSI will have priority over the IRS's NFTL if the PMSI is valid under local law" (IRM 5.17.2.6.5.11, section dated March 19, 2018, page reviewed April 30, 2026). A purchase money security interest (PMSI) is the lien a lender takes on goods its money bought.

The manual's conditions include these two:

• The money must buy the equipment. The lender must prove its funds were used for the purchase, and the manual says it typically does so with a check payable to the seller.
• The lien must be perfected on time. For business goods, the manual says a PMSI "must be perfected within a short period" after you obtain the collateral, and it points to UCC 9-317(e) and 9-324. The uniform text of UCC 9-324(a) gives a perfected PMSI in goods other than inventory or livestock priority over a conflicting security interest if it's perfected when the debtor receives possession or within 20 days afterward. UCC 9-317(e) gives a PMSI filed before or within 20 days after delivery priority over a lien creditor whose rights arise between attachment and filing. The manual names no number of days, so applying the 20 days to a tax lien is our reading, and your state's version controls.

By our reading, a new loan against machines you already own is a different case, because the manual describes a PMSI as arising when the loan is used to acquire specific goods. For a refinance or sale-leaseback, one IRS tool to ask a tax professional about is a certificate of subordination, which "does not remove the lien but allows other creditors to move ahead of the IRS." Publication 784 (Rev. 12-2022) asks for the application, Form 14134, at least 45 days before the transaction date.

IRS installment agreements, lien releases and the documents to bring

An installment agreement shows the balance is being handled, though by itself it doesn't release the lien. The IRS lien page describes two ways the record changes:

• Release. "The IRS releases your lien within 30 days after you have paid your tax debt."
• Withdrawal. It removes the public notice while you remain liable for the amount due. One Fresh Start route covers individuals, businesses with income tax liability only and out-of-business entities that owe $25,000 or less and have a Direct Debit Installment Agreement that pays in full within 60 months, among other conditions. On that wording, an operating business that owes payroll tax falls outside the list.

Bring the document that matches your status:

Equipment financing after bankruptcy: Chapter 7, Chapter 13 and discharge

A discharge "releases the debtor from personal liability for certain specified types of debts," according to the U.S. Courts (read October 6, 2026). In a Chapter 7 case it typically arrives about four months after the petition is filed. A Chapter 13 plan runs three to five years, and the discharge generally comes after all plan payments are complete.

While a plan is open, "the debtor may not incur new debt without consulting the trustee." Financing equipment during a Chapter 13 therefore starts with your bankruptcy attorney and the trustee, and lenders commonly want the approval in writing.

Two points matter for equipment:

• Old equipment liens can survive. A valid lien that wasn't avoided in the case "will remain after the bankruptcy case," so a secured creditor can still enforce it against that machine.
• Tax debt often survives too. The U.S. Courts list "certain types of tax claims" among the most common nondischargeable debts, and the IRS says a tax debt, lien and notice "may continue after the bankruptcy."

Lenders set their own minimum time since discharge, so ask before you apply. Under 15 U.S.C. 1681c (checked October 6, 2026), a consumer credit report generally can't include bankruptcy cases older than 10 years or paid tax liens more than seven years after payment, though those limits don't apply to a report used for a credit transaction of $150,000 or more. Our guide to business loans after bankruptcy covers options beyond equipment.

What SBA rules say about bankruptcy, tax liens and delinquent federal debt

An SBA loan can finance equipment, and SOP 50 10 8.1, effective October 1, 2026, sets these rules for 7(a) and 504 loans:

• Delinquent Federal Debt. An applicant isn't eligible if it or a guarantor (other than a Supplemental Guarantor) owes a nontax federal debt not paid within 90 days of its due date. A debt discharged in bankruptcy, or one under a satisfactory written repayment agreement that you're paying as agreed, isn't treated as delinquent.
• Prior Loss. A default on a federal or federally guaranteed business loan that left the government with a loss, including an amount "discharged through bankruptcy," makes the applicant ineligible. Unpaid taxes don't count as a loss.
• Taxes. An applicant that hasn't filed required federal tax returns isn't eligible, and a 7(a) borrower certifies before disbursement that it's current on all federal, state and local taxes. Paying delinquent business income taxes with loan proceeds "may be permitted if the Applicant has an approved payment arrangement with the IRS and the Applicant is current on the payments in the arrangement."
• Past bankruptcy. On SBA Express loans, "how much to factor in a past bankruptcy" is left to the lender's business judgment.

The SOP passages we read don't say whether a balance on an IRS installment agreement counts as "current," so ask the SBA lender.

A landscaping business example with the numbers

Picture a landscaping company that needs a $60,000 compact track loader before spring. The owner has a Chapter 7 discharge from an earlier business failure and personally owes $18,000 in federal income tax, with a lien notice on file. Every figure below, including the rates, is an assumption for illustration.

The lien. $18,000 is under the $25,000 ceiling for the direct debit withdrawal route. Paying it in full within 60 months takes at least $300 a month before interest and penalties ($18,000 divided by 60), and the owner sets the debit at $400. After three consecutive direct debit payments, and if the other IRS conditions are met, the owner can ask the IRS to withdraw the notice.

The file. The owner gathers the discharge order, the IRS agreement letter, bank statements showing the debits and the dealer's invoice with the serial number, then asks the lender to pay the dealer directly to keep the purchase-money trail clean.

The offers.

Offer B costs $10,132 less overall and takes $9,000 more cash at signing. Adding the $400 IRS debit, the monthly outlay is $1,685 under A and $1,607 under B, and a lender will test either figure against the company's slow winter months. Our guide to landscaping business loans covers that seasonal pattern.

EQ Funding isn't a lender. One application is routed to lenders in the network that compete to fund the business, and each assesses credit and repayment ability itself, so approval and terms vary by lender. Disclose the lien or the bankruptcy up front, and read our equipment loan requirements guide before you apply for equipment financing.