Will bankruptcy wipe away my unpaid property taxes?


Ask the Experts: Bankruptcy and property taxes

I owe several years back taxes on my home. If I file bankruptcy will it help with these taxes? –Bernadette

Hi Bernadette,

I’m sorry you’re in a position to be considering bankruptcy. That’s never a good situation to be in.

Bankruptcy is a long, complicated process. It’s there to help you hit the reset button, and while it can remove a majority of your debts, it doesn’t absolve you of all of your debt obligations.

To answer your question about property taxes, first you have to determine what type of bankruptcy you’ll be filing. The two major types of consumer bankruptcy are Chapter 7 and Chapter 13.

Chapter 7 is the type we generally think of when we talk about filing bankruptcy. Your nonexempt property (anything that isn’t considered essential) is sold to pay creditors and your remaining unsecured debt is dissolved. Chapter 13 is basically a court-mandated structured repayment plan – you keep your property and use available disposable income to make payments towards your debts.

In Chapter 13 your back property taxes would be repaid like your other debt obligations over the course of your mandated repayment program. In Chapter 7, property taxes less than a year old cannot be discharged, however, property taxes that were assessed more than one year prior to filing may be included. Tax liens, on the other hand, can never be discharged through bankruptcy. So if your unpaid property taxes have been converted into a tax lien that will stay in place no matter what, until you sell your house and use the proceeds to pay the liens.

Your best bet when it comes to bankruptcy is always to speak with a qualified attorney. Check out Bankruptcy.org for more information on bankruptcy, as well as our Attorney Locator to help you find a qualified attorney in your area. Best of luck.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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