If your home is owned outright, or you do not have an escrow account set up through your mortgage payment, you will be responsible for paying your yearly property taxes. It will be important to keep your property taxes current, as failing to pay them can lead to a lien being placed on your home.
Property taxes are secured by your home and therefore are not outright dischargeable in bankruptcy. In Chapter 7 bankruptcy, your property taxes will remain a lien on your home even if you have other debts discharged in the bankruptcy, such as credit cards and medical bills.
In Chapter 13 bankruptcy, your property taxes will need to be paid in full over the course of the Chapter 13 plan. These taxes are generally paid with interest, normally at about 10%. So, if you owe $10,000 in property taxes in the chapter 13 bankruptcy, you will need to re-pay that amount plus interest over the three to five-year plan. It will also be important to pay the yearly property taxes as they come due during the bankruptcy plan. Otherwise, you may still owe on property taxes even when you come out of a bankruptcy designed to pay off the old property taxes.
Your property taxes are not a debt that you should ignore for long. Some tax collection agencies and municipalities are aggressive about collecting, and as home values go up more and more, they have more equity in your home to go after. Unfortunately, property tax liens do not go away, and they can accumulate significant interest and penalties. These liens will remain even if you attempt to sell the house or leave it to someone in your estate after death. If you want to be able to sell or giveaway your home free and clear, you will need to make sure all property tax are current.
Contact us to set up a free consultation if you find yourself unable to catch up on your property taxes or if a tax lien has already been placed on your home. Chapter 13 bankruptcy could buy you three to five years to catch up and can stop a sheriff sale at any point before it occurs. Call us at 412-414-9366 to discuss your situation.