liens filed after bankruptcy for prior claims

[salisan]

My parents filed bankruptcy in 1991. Then in 1997 the state of Ohio filed a tax lien on their property but it was for assessments/claims from between November 1989 and July 1990 (i.e., claims that actually preceded the bankruptcy filing).

Is this lien valid given that it was filed after bankruptcy and was for claims that preceded the bankruptcy filing? It's blocking their ability to refinance their home. Thanks for any help.

(sorry if this would be better posted under the After Discharge forum. . . )

[HHM]

Since these are state claims, odds are they are valid liens unless the claims were paid in the chapter 13.

Was the state listed as a creditor in the BK filing. If not, your parents are SOL.

[salisan]

I don't think the state was a creditor in the BK filing (but I can find out for sure). Let's say it was, but for other claims, would that make a difference in this particular lien?

Also, I guess I don't understand how a creditor can come in after a BK is discharged and file claims that actually precede the initial filing. That would make it possible for creditors to delay filing claims until after a BK is filed & discharged so that they can avoid having their claims being part of the BK plan. Thanks for your input.

[HHM]

I don't think the state was a creditor in the BK filing (but I can find out for sure). Let's say it was, but for other claims, would that make a difference in this particular lien?

Also, I guess I don't understand how a creditor can come in after a BK is discharged and file claims that actually precede the initial filing. That would make it possible for creditors to delay filing claims until after a BK is filed & discharged so that they can avoid having their claims being part of the BK plan. Thanks for your input.

Yeah, but your first post mentioned that these are TAX LIENS. Those are an entirely different animal when it comes to BK (vis-a-vis other creditors).

If the state was not notified of the BK, then their claims are certainly valid. Reason being, tax liens are priority claims that MUST be paid. If that creditor, the state, is not notified of a BK, the debt remains valid.

[salisan]

Thanks. What if the State was notified of the BK and did have tax claims settled through the BK? In that case, would this particular lien still be valid since it's not filed until after the BK was discharged?

[HHM]

Unfortunately, all we can do is speculate at this point, because there is no way you can provide enough information to say one way or the other.

Basically, when it comes to tax liens and BK.
1. They must be paid, and must be PAID in full.
2. The state must be notified of the BK, and EACH SPECIFIC DEBT must be identified vis-a-vis the BK.

About all they can do at this point, is break out the chapter 13 paperwork, and contact their attorney.

[salisan]

Ok, I found out that the state was notified at the time of the BK and they put in most of their claims at that time, but not all of them (including the one that is now encumbering the property).

I'm wondering if the question is whether 506 rule comes into effect because at the time of the BK, the state was third in line on the property (bank that held the mortgage was first, IRS second, state third). After the first two creditors, there was nothing left in equity/value in the property to secure the state claim, so wouldn't it be unsecured, meaning they could garnish wages and come after it in other ways, but not through a lien in the property? So I guess I understand that tax liens have to be paid in full, but if the claims exceed the value in property, don't the creditors have to look elsewhere to get their money?

[biotechsolution]

was it a chapter 7 or 13?

Although I don't think it would matter much because the lien was filed after the discharge.

Your big question would be if the tax was dischargeable? If they filed in 1991 and the liens resulted from tax that was owed in 1989 and 1990 then the the wouldn't have been old enough to be discharged.

But if they filed a Chapter 13 and it was included in the plan has a priority debt it would have been paid in full so they shouldn't have any claim. However, if it wasn't paid in full then they could still collect on the outstanding balance.

If they filed a Chapter 7 they they never had to file a claim or anything because the tax was not considered dischargeable and they could just collect after the BK is any way they see fit. Which would be issuing a lien.