Have cash and delinquent real estate taxes

[time4cake]

I am delinquent in regards to the property taxes on my primary residence. To bring these taxes current would cost approximately $9,500. I currently have the funds available to pay these taxes. Should I pay these real estate taxes prior to filing? If I don’t pay them prior to filing what will become of the real estate tax “debt” and the funds I currently have earmarked to pay the real estate tax debt?

[SinkingFast]

If you don't have an exemption limit to cover the cash, the Trustee will sieze the cash for distribution to the Creditors.

If you can cover the cash with an exemption, penalties and interest continue to accrue on your past due tax debt.

We just went thru selling our truck to pay the IRS taxes we owed for last year, 2005. The attny is not at all concerned because the money was used to pay off the loan on the truck, a Secured Creditor, and the IRS, a Priority Creditor. Plus the attny preferred we not go into BK filing with any tax debt hanging over our heads.

Personally, were I in your shoes, I'd pay the taxes and have one less worry going into BK or hanging over your head coming out of BK.

[possumfat]

other than hiding assets and paying insiders how can the trustees dictate how you spend your money before filing ?

[SinkingFast]

other than hiding assets and paying insiders how can the trustees dictate how you spend your money before filing ?

Plenty!!!

If we had sold the truck and given the proceeds to CC's or other unsecured debt, the Trustee would be ticked, AND would go after the money. If we had spent the proceeds on a vacation or otherwise frivolously, we'd have to pay it back to the Court.

Being we paid off the Loan, a Secured, and the IRS, a Priority Creditor, there's not much the Trustee can do. May be PO'd that we sold an asset, but we had good reason. We owed Uncle Sam.

Spending cash assets to pay taxes may tick off the Trustee, but there's not much the Trustee can do about it. Not like the Trustee will go back to the County or the State to recover the funds.

If the taxes aren't paid prior to filing BK, besides possibly loosing the cash, TT runs the risk of the Trustee seeking a Court order to sell whatever assets to pay the taxes due. While not likely, it can happen.

[time4cake]

Just to answer my own previously started post:

My attorney suggested that I not pay the taxes until after bankruptcy.

The reason he suggested not paying the taxes is that real estate taxes are secured debt, and as such I am allowed to divide the balance by 60 months and report it as part of the secured debt deduction on the means test.

If I were to pay the debt it would no longer be a debt at all, and therefore would not help me at all with the means test.

[aa06a47]

Well, the trustee cannot sell the home if there is an IRS lean against it. That's one way of looking at it. Of course, you will probably still lose all that cash in your account to pay your creditors. If you list the taxes, that money should go automatically to the gov as a secured creditor.

[time4cake]

Well, the trustee cannot sell the home if there is an IRS lean against it. That's one way of looking at it. Of course, you will probably still lose all that cash in your account to pay your creditors. If you list the taxes, that money should go automatically to the gov as a secured creditor.

I am not refering to an IRS lien, I am referring to delinquent real estate taxes from 2005. This has nothing to do with income tax.

[aa06a47]

I am not refering to an IRS lien, I am referring to delinquent real estate taxes from 2005. This has nothing to do with income tax.

OK, real estate taxes, the county can sell the house at the court house steps. I do not know if you have bk protection against a state or local tax issue. This is a unique question.

Did your attorney tell you why he wouldn't pay the taxes? Are you going to let the home go back? If you have that much personal property tax, I am sure your looking at a very expensive home.

[djk]

.....

If I were to pay the debt it would no longer be a debt at all, and therefore would not help me at all with the means test.

depends on if you need the help with the means test or the J. If you don't
pay the taxes you can not claim them as expense along with mortgage. If you do pay the taxes, you can in either line 1 or line 12.

[SinkingFast]

Just to answer my own previously started post:

My attorney suggested that I not pay the taxes until after bankruptcy.

The reason he suggested not paying the taxes is that real estate taxes are secured debt, and as such I am allowed to divide the balance by 60 months and report it as part of the secured debt deduction on the means test.

If I were to pay the debt it would no longer be a debt at all, and therefore would not help me at all with the means test.

That makes sense, Time.

If we hadn't paid our income taxes, the attnys coulda used that as "Secured Debt" as well. Every attny, except one, told us to keep the truck and work out a payment plan with the IRS. If we had followed that advice, we'd have to buy back equity in our truck from the BK Court, whilst paying payments on the loan on the truck, AND pay payments to the IRS, as interest and penalties continued to accrue along with aquiring an IRS Tax Lien.

My head was swirling with dollar signs of all the payments all the attnys were suggesting. A little here and a little there is how we wound up here to start with. The attnys were looking at putting us back in the same spot again with no safety net. And an IRS Tax Lien will prevent you from getting any credit from anyone until that lien is satisfied.

Only one attny told us to settle our tax issues before we filed.

If ours had been delinquent property taxes, I woulda kept those for the BK. Sounds like a smart move by your attny.

[time4cake]

If ours had been delinquent property taxes, I woulda kept those for the BK. Sounds like a smart move by your attny.

It is a smart move provided that I can exempt the cash I currently have earmarked to pay the delinquent taxes. If I can't keep the cash it will certainly be a struggle.

[Minnymouth]

If you can pass the means test without the money for the property taxes, the I would go ahead a pay the property taxes before filing.
Check with your attorney.

I believe that since the property taxes is also a priority creditor it would fall NEXT IN LINE to income taxes, then the other creditors would fall in line as secured, and unsecured. I imagine state and local taxes are paid before any secured creditor is paid in the chain of command.

Since the Trustee will not fight IRS, I don't imagine they would fight the state or local tax issues either.

Only your attorney could tell you for sure....

Paying them before BK would guarantee getting rid of the tax bill - stop the Trustee from seizing your funds - and still pay a priority creditor instead of a secured one.

You do not want funds the Trustee can seize, then still end up paying property taxes after bankruptcy.

Personally, I would pay the real estate taxes before BK, eliminating that debt completely and then if the Trustee wants to fight it out with the state or local tax people - LET HIM......

Be sure you do talk to an attorney about this issue,


Just my thoughts,