Property Tax & Chapter 13

[freedom0717]

I'm looking for some advice on my delinquent property taxes. We filed Chapter 13 in early December. The property taxes for our home was due in December as well. We were advised by our attorney that since we were surrendering our home, we would not need to pay the property taxes. During our 341 meeting last week, the trustee brought up to the attorney that the property taxes expenses was not included in our monthly budget. I was a little confused when he commented on this, but didn't want to question the trustee during the meeting and raise any unnecessary red flags. I went back to our attorney and asked if the county should have been listed as a creditor in our petition. He just came back and said that it's my responsibility to pay all property taxes until the property changes ownership. (well, this was news to me, as he did not state this originally). I told him that I am surrendering the property, why would I spend $4000 on delinquent and upcoming taxes until the property ownership is changed out of my name.

Our attorney asked if we could just pay the delinquent taxes outside of the BK (which I don't want to do). If not, he also mentioned we could consider not paying any taxes and seeing perhaps if the lender will take care of paying the taxes to clear the title before they sell it. He mentioned we would run the risk of having the county or bank disputing the Chapter 13. How would that affect our Chapter 13 being confirmed?

I'm thinking that my attorney made a mistake with our paperwork by not including the county as a creditor, but perhaps there is something I'm missing? My attorney is stating that if we were to amend the filing, it would delay things and it sounds like he doesn't want to do that...but I really want to make sure everything is accurate.

Any advice would be appreciated. Thanks!

[justbroke]

He just came back and said that it's my responsibility to pay all property taxes until the property changes ownership. (well, this was news to me, as he did not state this originally).

First, what State do you live in? Second, I have never heard of such a thing.

In every State that I know of, property taxes attach to the property. Especially since you're surrendering the property in lieu of paying the taxes, you would not pay any property tax. The taxing authority would just sell a tax certificate and then issue a tax deed at some point. You are not responsible for the taxes.

Your Tax Collector should be listed on your Chapter 13 Plan as a Secured Creditor with a disposition of "Surrendered in full satisfaction of claim".

[freedom0717]

Thank you for your reply. I live in CA. I appreciate your response!

My tax collector is not listed as a secured creditor, only my 2nd lien lender is listed in that section. I'm guessing my attorney missed this on the petition. Since I've already filed, would it be a problem to include the taxes now?

[justbroke]

My tax collector is not listed as a secured creditor, only my 2nd lien lender is listed in that section. I'm guessing my attorney missed this on the petition. Since I've already filed, would it be a problem to include the taxes now?

You can easily modify your Plan before confirmation, by just submitting a new one and serving it on your creditors. Once it's confirmed, modification requires a hearing, so it's best to get all the issues worked out before the confirmation of the Plan. The property tax collector should be listed and should be on the Mailing Matrix as well.

I don't know how property taxes, even in California, can be in personam, or against the individual person. As you are probably aware, Bankruptcy removes all in personam responsibility upon discharge. From what I know, all States pursue property taxes only by in rem, or against the property, actions.

I don't know California law, but this would be a shocker to me. Not that I haven't been shocked before by differences in laws across State lines!

[catleg]

Property taxes are the obligation of the mortgage servicer, assuming you have a mortgage. They will be repaid these funds first out of the foreclosure proceeds, before the noteholder gets any money.

[LadyInTheRed]

Yes, even in California, the county has a senior lien for property taxes and gets paid upon sale before the lender or any other lien holder, including the IRS. You would only have personal liability if the house is not worth as much as the unpaid tax. For your attorney to suggest you pay the tax when you are giving up the house is ridiculous. He doesn't want to do the work to amend your schedules. Insist he do this even if it does delay things. If he refuses, call the state bar.

[cluelessNoc]

Property taxes & Chapter 13

Does anyone know how tax arrears are treated in ch13?

I owe 2007 and 2008 back property taxes that are accruing penalties @1.5% per month. Can the arrears be included in the plan?

Thanks

clueless

[justbroke]

Does anyone know how tax arrears are treated in ch13?

Property Taxes are treated as "secured" debt -- in almost all States -- and are listed with alongside your mortgage. You pay whatever the delinquency rate is at the time you filed. For example, if your Tax Assessor charges 18% a year, then you pay 18%. If they sold the "tax certificate" and the certificate is at 0.25%, then you pay 0.25% for the term of your plan.

So, yes, the arrears are included, and you'd pay 1.5% per month or 18% per year in your Plan.