Tax implications with a 7 and foreclosure?

[flower04]

We are waiting to pass the means test next month after DH lost his job. We are foreclosing on our home. We owe about 30-40K more than it would sell for. Are we still responsible for taxes on this house while we are living in it until the foreclosure is complete? Our property taxes are included in our mortagage payment (of which we are stopping payment on).

Thanks so much.

[justbroke]

Property taxes go with the home. When you surrender it in the Bankruptcy, whoever gets it (Bank through the foreclosure, or the winning bidder at auction), will have to pay the taxes to get a clean title.

[moneytrouble]

My taxes are due in August 2009. The mortgage company has not foreclosed on the home, and it has been almost 8 months of non-payment. Discharged June 1. Will the bank have to pay all of the taxes, or only the taxes from the foreclosure date? They may not foreclose until August 2010, from what I am reading.

[justbroke]

My taxes are due in August 2009. The mortgage company has not foreclosed on the home, and it has been almost 8 months of non-payment. Discharged June 1. Will the bank have to pay all of the taxes, or only the taxes from the foreclosure date? They may not foreclose until August 2010, from what I am reading.

Taxes are attached to the property. When the Bank forecloses (actually gets ownership of the home), they will have to pay all back taxes to get a clean title.

Usually, they'll pay a "property preservation" fee by paying the back taxes. The bank doesn't want to "lose" the home over taxes!

[moneytrouble]

Do you know why HOA fees are treated differently? My lawyer and other people on this site, state I owe all HOA fees accrued starting the day after my discharge, even though I am not keeping the home. Why aren't they included in the foreclosure?

[justbroke]

Do you know why HOA fees are treated differently?

Well, maybe. Because HOA dues are not taxes. They are fees and assessments charged by a non-governmental unit. Also, it depends on underlying State non-bankruptcy law as to how they are treated. Most HOA fees are assessed against the owner of a property. That means, it's a personal responsibility. Most HOAs need to file a lien when you don't pay them. The lien on your home then secures the HOA fee. However, you owe it personally.

My lawyer and other people on this site, state I owe all HOA fees accrued starting the day after my discharge, even though I am not keeping the home. Why aren't they included in the foreclosure?

Yes, you do. HOAs fees are based on the property, but are assessed against the owner.

[moneytrouble]

There was a lien against the home for unpaid dues, prior to my Chapter 7 bankruptcy discharge. Is this lien still in effect after my discharge? Is it automatically lifted? If the lien is still there, and they don't foreclose for many more months, will my unpaid HOA dues after the discharge somehow stop foreclosure of the home? I really don't want to pay these, as I am no longer living there using their services. I moved out the week of the discharge. Do HOAs report past due fees to credit reporting agencies?
The HOA rep stated the lien is lien and will not be removed until the bank pays them in full for past due fees, does not matter about my bankruptcy discharge. Who decides who pays who? Will the bank come after me for dues after the discharge holding up the foreclosure or will the HOA?

[justbroke]

There was a lien against the home for unpaid dues, prior to my Chapter 7 bankruptcy discharge. Is this lien still in effect after my discharge? Is it automatically lifted?

Because the HOA obtained and recorded a lien before filing, the HOA dues are not discharged.

If the lien is still there, and they don't foreclose for many more months, will my unpaid HOA dues after the discharge somehow stop foreclosure of the home? I really don't want to pay these, as I am no longer living there using their services. I moved out the week of the discharge. Do HOAs report past due fees to credit reporting agencies?

No. What happens is that the HOA could seek to foreclose the property, but the Lender (Creditor) will certainly step in before that and satisfy those fees.

The HOA rep stated the lien is lien and will not be removed until the bank pays them in full for past due fees, does not matter about my bankruptcy discharge. Who decides who pays who? Will the bank come after me for dues after the discharge holding up the foreclosure or will the HOA?

Right. If they got an actually lien recorded before the Bankruptcy was filed, then it is enforceable. The lien does not just go away. The Bank, or whoever purchases upon foreclosure, would need to pay the lien.

[moneytrouble]

Would the bank come after me for the fees accrued after the discharge, or is it unlikely? I thought I could be done with this financial nightmare after my bankruptcy.
Does a lien against my property affect my credit score?
Thanks for the help!!!

[justbroke]

Would the bank come after me for the fees accrued after the discharge, or is it unlikely? I thought I could be done with this financial nightmare after my bankruptcy.

I don't know. Technically, in Bankruptcy, you are responsible for all post-discharge HOA fees until the foreclosure occurs. Some States, like Florida, do make the lender (bank) liable for up to 12 months worth of those fees.

Does a lien against my property affect my credit score?

No, liens don't affect credit. However, a creditor attempting to enforce his lien through collections... would.

[mdk2006]

That means, it's a personal responsibility. Most HOAs need to file a lien when you don't pay them. The lien on your home then secures the HOA fee. However, you owe it personally.

Yes, you do. HOAs fees are based on the property, but are assessed against the owner.

If they are a "personal responsibility", and you declare bankruptcy and give up the house in the chapter 7 and foreclose, according to bankruptcy all personal responsiblity related to the home is not yours, you release all personal responsibility....SO HOW can they still go after you for HOA???

[justbroke]

If they are a "personal responsibility", and you declare bankruptcy and give up the house in the chapter 7 and foreclose, according to bankruptcy all personal responsiblity related to the home is not yours, you release all personal responsibility....SO HOW can they still go after you for HOA???

I think you misread my earlier post and took it out of context. In some States, some property taxes are assessed against the property (in rem), and some are assessed against the owner (in personam). Bankruptcy discharges the in personam (personal) responsibility!

Re-read the bankruptcy code. It only discharges those HOA fees that arose PRIOR to filing. It does not discharge post-petition HOA fees and assessments.

However, in practice, most Banks will pay all HOA fees and assessments, as well as property taxes, when they foreclose.

[sako]

Hi Justbroke,
you seem to know lots about BK. Can you please help answering my questions below?

My BK7 was discharged 6/18/2010. My rental home was lifted from stay, granted to the Wells Fargo Bank 6/18/2010. I don't know when the Wells will foreclose the house. I'm not sure if the Allstate already cancel homeowner insurance on my rental property but i think it wills sooner or later. So, according to your earlier posts, i'm still responsible for HOA due untill foreclosed? What about Homeowner Insurance? Should i disconnect electricity/gas and water?