How Property Tax Liens Are Handled In Chapter 7

Having property tax liens on your house is the typical result of failing to pay the taxes you owe. The state you live in will place a lien on your home shortly after the bill becomes delinquent, and this is something you will have to pay if you decide to sell your house. If you decide to file Chapter 7 bankruptcy, you might not have to pay the bill, though, but this will depend on what happens to your house in the bankruptcy case.

The options you have with your home

There are two main options for a home when a person files for Chapter 7, and there are times when people can choose which option to use and times when they cannot. The first option is to keep your home, but this will only be allowed if you have very little equity in the home. Without equity, a trustee has no use for your home. With equity, a trustee could sell it to raise money, and the money would be used to pay off your creditors.

The other option is to give up your home, and this might be something the trustee forces you to do. If you give up your home, you will have to walk away with it without making a dime on the sale. The trustee will take it and sell it, and the money will become part of your bankruptcy estate.

The results of property tax liens if you give up your home

If you decide to or are forced to give up your home in the bankruptcy, the trustee will take the money from the sale and will pay off the loan on the house first of all. If there is still money left, it will be paid to your creditors, and if you have property tax liens, these will be one of the first debts paid. If there is not enough money to pay off the liens, the liens will not get paid, and you will not be responsible for them. Basically, you will never be responsible to pay property tax liens if you give up your home. This problem becomes the trustee's issue, and the trustee will decide how to handle it.

The results of property tax liens if you keep your home

If you keep your home, on the other hand, you will most likely be responsible to pay off the liens. While you might not have to pay them immediately, they will not go away. Whenever there is a lien on a house, it must always be paid by the owner of the house when the owner sells the house. Keeping your house, therefore, will almost always result in having to pay back property tax liens that are owed.

A bankruptcy attorney can tell you more about how liens work in bankruptcy cases. If you have questions about this or other topics related to bankruptcy, contact an attorney, like one from Greg Dunn Bankruptcy Attorney, to discuss your case.