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Business property tax discharge question ?

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  • Business property tax discharge question ?

    I closed my small business in 2009 and got a CH7 discharge in 2010.
    Was renting the space, and only owned the equipment inside and tenant improvements.
    The equipment reverted to the bank, who had provided a business loan.
    I was 4 years behind on "business personal property" taxes imposed by the County.
    My CH7 petition included the County as a debter.
    Thought the County taxes were going to be discharged per my BK attorney, as the business went bankrupt.
    Just found out the County has put a lien on my personal residence due to unpaid business personal property taxes due ........ !
    Can they do that ........ ?
    Went down to the County offices today and spoke to 2 individuals who could not provide a clear answer.
    One of them said he would research it and get back to me in a couple of days.
    Don't have the funds to engage a lawyer, so I am looking for information, suggestions and pointers to case law.
    Thanks for your responses.

  • #2
    In theory, taxes are dischargeable if all of the following conditions are met
    • a return for the taxes was filed; and,
    • the return was filed more than 2 years before filing the bankruptcy; and,
    • the tax was last due more than 3 years ago; and,
    • if it was for tax assessed, then at least 240 days has passed since the
      assessment and the filing of the bankruptcy; and,
    • it is based on income or gross receipts.
    Generally speaking, the best way to ensure that dischargeable taxes are actually discharged, is to file a complaint (adversary proceeding/AP) in the Bankruptcy Court to make a determination.

    What has happened to you is that the County/Municipality believes that the taxes were not discharged. I'm not totally sure myself that a business tax is dischargeable as to the business itself. However, is your liability to pay it discharged in the bankruptcy?

    This is why an AP would have been nice to make that determination. It appears the County believes that the taxes are not discharged. You may need to re-open your case and file a complaint.

    Now, this type of tax is special since it is against the business and the equipment/fixtures of the business. Since it's not a "trust fund" tax this should be dischargeable as to your personally (in personam). Other business taxes, like payroll taxes, are "trust fund" taxes where you are holding them on behalf of the employee; those are non-dischargeable (period).

    Go back to your attorney. See what you need to do. Your attorney may be able to write a letter to the taxing authority and tell them to cease and desist or they'll end up in the bankruptcy court. That may or may not work.

    Unfortunately you are probably going to need an attorney. You may be able to find one that will take this case on contingency if it's a clear-cut violation of the permanent discharge injunction. I would certainly go back to my own attorney first.

    I would love to know how this works out.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      JB - thank you so much for your prompt reply.
      I think I will go back to my BK attorney and spend the few hundred to "save" the $9K the County wants to collect.
      After losing a business, and a livelyhood it is tragic that the County wants to suck more blood out of me.
      I operated the business for 5 years, employed 12 people, kept current on payroll, sales tax, state & federal taxes, and now this ........


      • #4
        So, after 10 days I heard back from the County...........
        They said the property tax debt was discharged in BK7; I am not obligated to pay it, and they will not try to collect it.
        However, the debt will stay on the Public Record.
        I do not understand what it all means ?
        Can someone clarify ?
        They also said I should contact my attorney, who may be able to file some paperwork to have the lein removed.


        • #5
          Yes, the debt says on the "public record" (credit reporting) for 7 years. As for the lien, your attorney could file a Motion to Void Lien, but that would require re-opening your case in the Bankruptcy Court ($260 just for the re-open fee). There may be a procedure in your local (State) non-bankruptcy court to avoid a lien due to discharge of the debt in a bankruptcy. That may be the cheaper option than re-opening your bankruptcy case.

          Just asking... is this all in response to a letter that your attorney wrote, or did you write the letter yourself? Also, when did they file this lien? That, in and of itself, could be a violation of the permanent discharge injunction (if it was done after you filed).
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          I am not an attorney. Any advice provided is not legal advice.


          • #6
            Thanks again JB!
            How this came to the surface is I had a title report pulled on my personal residence, and was surprized to find a lien on it, arising from my unpaid personal business property taxes which were included in my BK7 filing.
            The County filed the lien 3 months prior to my BK filing.
            The County employee said they had filed 4 liens, 3 of the prior ones were reversed but the 4th remains (it is for a mere $1436!)
            I can only guess the 4th and last may also get reversed when their records are due for an update.
            In any event, I will contact my attorney and see what he recommends.


            • #7
              Very nice to read the status. I was hoping that the lien was filed prior to filing! Hopefully, a nice letter may encourage them to voluntarily remove the lien?
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              I am not an attorney. Any advice provided is not legal advice.


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