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Jan 2012Bankruptcy and real estate taxes: Counties are desperate
Posted by Robert Weed / in Virginia Bankruptcy / 6 comments
Bankruptcy and real estate taxes:Â Counties are desperate
Filing bankruptcy gets rid of most of your debts; but it does not necessarily get rid of most of your problems.
For some people, real estate that they already moved out of is a problem.  Filing bankruptcy does not mean the bankruptcy court takes over your house.  Unless the bankruptcy trustee thinks they can sell it and make some money to pay people off, the trustee will abandon the house.  That means, it goes back to you and the bank.
It goes back to you and the bank, meaning you are still the owner.  You are the owner until the bank takes over; and sometimes the bank is in no hurry.  So you still have all the obligations of the owner.  Paying the HOA or condo associations; mainting code standards (like cutting the grass), and paying the real estate taxes.
For several years I’ve told people–be sure you pay the hoa; and make sure you cut the grass; but you can probably ignore the taxes.
Why did I tell people they could safely ignore the real estate taxes?  At the foreclosure sale the county will require the taxes to be paid then, and the county will wait for the foreclosure.
What I’m seeing around here is that the counties are tired of waiting.  In the last two months, I’ve seen two people get garnished for real estate taxes on homes that are sitting empty, waiting for foreclosure.
“I’m changing what I tell people about paying the real estate taxes after bankruptcy.”
Why this change? Â The counties are desperate. Â Counties get a whole lot of their revenue from real estate taxes. Â With real estate value down, county revenues are down. Â The Obama stimulus plan made up a lot of the gap. Â Republicans in 2011Â blocked doing more of that.
So the counties are desperate. Â And they are starting to garnish the homeowners for the unpaid real estate taxes. Â The county needs the money NOW and they don’t have to take your to court to garnish you–they can just do it.
So, should you pay the real estate taxes? Not if the bank is paying, which they often do–even if you’ve stopped paying the bank.
Before you do anything, call the county and see if the bank has paid them.
But if the bank isn’t paying, should you?  It’s certainly the safer choice.
You probably want to make a payment arrangement.  Because if the bank does finally foreclose, then the buyer will have to catch up and you’ll be off the hook.  You don’t want to pay any faster than you have to.
(Of course this reinforces my advice: until there’s an actual foreclosure sale, DON’T MOVE OUT.)
PS  Nothing is more local than county government.  Lots of people all over the country post questions on my website.  And I’m glad to answer what I can.  (Thank you for your interest, too.)  But your guess will be better than mine about what county governments are doing in PA or NV or FL.  I don’t even know anything about Virginia, away from the counties in the DC area.  Sorry.
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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.
Cynthia Goodwin
We have a condo property that burned down nine years ago. The co owner of one third of the unit went bankrupt then his bank was taken over by a larger bank. We cannot rebuild and b of a is impounding both our taxes and his under our mortgage and forcing us to pay double. Is this legal? Will we own his interest if we keep paying? The land is equal and undivided.
Robert Weed
When you cosign for someone you say, if he doesn’t pay, I will. So when you bought the condo with others, both of you were on the hook for the whole amount. He filed bankruptcy, so now the whole mess is on you.. Sorry.
Now, what’s going on here? Your condo burned down NINE YEARS ago. Your partner went bankruptcy and stuck you with the problem. And YOU still haven’t talked to a bankruptcy lawyer yet???? Monday would be a good day to talk to a lawyer near you about what your choices are.
christy jarvis
I have a home that is still owed on and I had renters in, the renters are moved out and I do not want to continue with the house , I am wanting to just file bankruptcy on it, what do I do??
Robert Weed
Christy:
If you are in Northern Virginia, please call me. 703-335-7793.
Jennifer
My husband owned a house in Stafford with his ex. After divorce, first she abandoned the house, then she went bankrupt. After he tried to short-sale, he too went bankrupt (ch 7) in 2010. Only this April did BofA finally take possession of the house in a foreclosure auction (after canceling 3 other auctions earlier!). During that time the house was still in their names. BofA paid the real estate taxes, took out vacant property insurance, and hired someone to do mowing (even though my husband was still mowing lawn). We are very concerned about this. He’s tried talking to his lawyer, who hasn’t been all that helpful since his debt was discharged.
My question is, now that the bank has possession of the house, after it sells, can BofA come after him for the taxes they’ve paid to the county, etc, incurred since his 2010 bankruptcy?
Any information you can provide would be much appreciated,
thanks
Robert Weed
Jennifer:
I didn’t open in Stafford until 2011, I won’t take it personally that he saw a different Stafford bankruptcy lawyer in 2010.
I don’t THINK they can come back at him for the money BofA laid out for taxes and insurance after the BK until they finally foreclosed. That’s because the promise to pay, the “note,” was discharged in the bankruptcy.
I’ve always worried that the bank might argue that the obligation to pay the taxes is a “covenant that runs with the land.” The Fourth Circuit–the big guys between us and the Supreme Court–likes covenants that “run with the land.” I think the bank could make that argument, but I’ve never seen them try.
So, I’m saying I’m 95% confident you are safe. Maybe 99%. But not quite 100%.