A bankruptcy question

I just got off the phone with my brother who is asking me some questions I don’t know the answer to. And his problem is really got me shaking my head.

If one were to file for bankruptcy protection, and debts were discharged, would owed property taxes be discharged also?

If it matters, his state of residence is Pennsylvania, and the property taxes are on a double-wide mobile home.

Thanks everyone for the help.

IANA(Bankruptcy expert), but I would seriously doubt it.

Property taxes would not be eliminated, but those taxes run with the property. About the worse that can happen is the property related to the tax is forfeited.

IANAL, but I can read the bankruptcy code (but i’m still a moron, so place no stock in what i say). It really looks like property taxes aren’t discharged.

The tax exception to a discharge available to an individual under Chapters 7, 11, or 13 of the bankruptcy code is found at 11 USC sect 523(a)(1)(A), which incorporates 11 USC sect 507(a)(8)(B).

523(a)(1)(A) literally provides: “A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt (1) for a tax or a customs duty (A) of the kind and for the periods specified in section 507(a)(2) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed…”

11 USC sect 507(a)(8)(B) then identifies “a property tax assessed before the commencement of the case and last payable without penalty after one year before the date of the filing of the petition.”

Also, even if the property tax debt was somehow discharged, once the government has a lien assessed on the property, that lien’s not going anywhere. Liens pass through bankruptcy unaffected. Long v Bullard.

In my state, no taxes are discharged - although you can keep your house (depending on your title/deed), your car, and your retirement funds(ira and 401k).

If he had paid the property taxes with credit cards “before he considered going bankrupt”, credit card debt would have been discharged.

He should be asking an attorney in his state for advice. Each state is different in what they allow you to keep.

However, one thing you can do is to be sure to tell your brother that there is nothing wrong with going bankrupt. Wayne Nueton, Burt Reynolds, Davy Crockett, Donald Trump, the BAss brothers, etc all went bankrupt, as well as many fine american companies. Lots of americans still like Davy Crockett, Abraham lincoln, Thomas edison, etc despite financial setbacks in their lifetime.

If Sutter had not gone bankrupt “twice”, he would not have been able to buy that saw mill in CAlifornia where gold was discovered in 1848.

If abraham lincoln had not gone bankrupt, we could not go to florida in the winter.

If Edison had not gone bankrupt , we would not have electric lights, movies, records/cd’s,

If Ford had not gone bankrupt, we would still be riding horses to work.

If disney had not gone bankrupt we would not have Donald Duck orange juice.

Hey everyone, thanks for the info. I asked my Co’s accountant today the same question. Apparently in our state, PA, Chapter 11, reorganization, taxes are not forgiven, but in Chapter 7, liquidation, they may be.

But the real answer is: “Get a BANKRUPTCY Lawyer”.

guy_from_wpa, that’s not just true in PA, it’s true in all of the USA. I’m sorry that my quoting the bankruptcy code above wasn’t all that clear.

There is no variation in what claims are dischargeable in bankruptcy. That’s determined by the federal bankruptcy law. The only pertinent variation from state to state is what personal property of the debtor is “exempt” – meaning that creditors can’t force it to be sold off to satisfy the debts to them – in the various “chapters” of bankruptcy.* Congress decided to let debtors choose either the default federal exemptions or those of a state (see sect. 522(b) of the bankruptcy code). For example, each state has its own dollar limit as to the permissible homestead exemption for individuals filing for Chapter 7 bankruptcy. Florida, for example, has an unlimited homestead exemption – you can keep your mansion. (Exemptions for chapter 13 bankruptcies are much less important, because in chapter 13, you get to keep your “stuff” in exchange for giving up a portion of your future earnings.)

  • The “chapters” refer to the chapters of the bankruptcy code under which the person/corporation/municipality is filing: chapter 7, chapter 11, or chapter 13. Chapter 9 is for municipalities only, and chapter 12 is for farmers.