As people overwhelmed with credit card bills, loan debt, mortgage payments, and other forms of secured and unsecured debts assess their options for getting their finances back to a manageable place, they often consider filing for bankruptcy protection. Either Chapter 7 or Chapter 13 personal bankruptcy can be a useful tool for alleviating many types of debt—despite the hit your credit takes—but when it comes to property taxes, there are a few things you should know.
Discharging property tax debt in Chapter 7 bankruptcy
Chapter 7 bankruptcy (also known as liquidation bankruptcy) allows filers to eliminate their property tax debts that are at least one year old after liquidating their non-essential assets. However, if your property tax debt has been accumulating over time, there’s a good chance the IRS may have already recorded a tax lien on your property. Unfortunately, existing property tax liens can never be discharged through bankruptcy; that means that if a lien exists you’ll still have to pay it off in order to retain or sell the property.
Discharging property tax debt in Chapter 13 bankruptcy
Whereas in a Chapter 7 bankruptcy debts are ultimately eliminated, in a Chapter 13 bankruptcy—often referred to as reorganization bankruptcy—debts are consolidated and paid off over a period of three to five years. When you file for Chapter 13, any existing outstanding property taxes you owe are folded into a single payment that encompasses all of your debts included in the bankruptcy filing. So your property tax is not simply forgiven, but it is also no longer a separate financial obligation. Similarly, if a tax lien exists on your property when you file Chapter 13, you will incorporate the full amount of the lien into your monthly bankruptcy payment.
Consult a knowledgeable New York City bankruptcy attorney for guidance and support
Choosing to file for either Chapter 7 or Chapter 13 bankruptcy protection in the Bronx is no easy decision. It’s important to make sure you can achieve your financial goals through bankruptcy, especially if they have to do with property taxes you owe. As you navigate the process, it’s crucial that you have an experienced Bronx bankruptcy lawyer on your side to advise you and protect your rights. For more than 30 years, Thomas M. Denaro, Esq. has advocated for clients experiencing the financial stresses that may lead to bankruptcy. To learn more about how we can help, or to schedule a consultation today, call (718) 863-6000 or contact us online.