I’m Three Years Behind on Property Taxes. – Darin

“Dear Steve,

A partner and I just dissolved a small business which had seriously declining revenue over the past few years. I owe 48k in credit card debt, 78k on a mortgage for a house that needs a ton of work, and 8k on a car. I still have my job which gives me 50K, but that’s not enough to meet minimum cc payments together with all else, in fact I’ve missed two months on credit card payments already. I’ve been paying the mortgage and insurance, but I’m 3 years behind on the property taxes and have received an advanced foreclosure notice. I realize I’m probably going to have to file bankruptcy (not sure if I should do 7 or try to do 13 to keep the house.) My mortgage/taxes/insurance add up to about 1200/mo., and I’m telling you the house is in serious need of repair (heating system, wiring, plumbing) but it’s in the country (I value that) and would be paid off in 11 years (I’m 46).

I’m wondering if I should try and save the house by repaying the property taxes in a chapter 13 plan, or if I should just let them foreclose. I tried auctioning the house for what I owe on it, but no takers.

Thanks for your input, much appreciated.

Darin”

Dear Darin,

Interesting situation.

If the house is sold for taxes you would lose title to the property but still owe the mortgage. Not a great situation to be in.

You obviously enjoy the location of this house in the country but I am not convinced that you feel this is the “must have” house for you.

Let’s say you fall on the sword and go bankrupt. It would be a shame to waste that fresh start opportunity and not clear all the debt you have hanging over your head so you can get a truly fresh start.

Sure, if you include the house now, give it back to the bank and do a Chapter 7 bankruptcy to discharge all the debt, you won’t have that house anymore. But that does not mean you won’t have another house in the country in the future.

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Besides, I see this house as a continued financial anchor around your neck when you can least afford it. Things like new wiring, plumbing, heating, etc are damn expensive.

But this is just my opinion after living through these issue and watching many others struggle. My vote, go for the whole fresh start and reboot your entire financial life.

Please update me on your progress by

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

Steve Rhode

4 thoughts on “I’m Three Years Behind on Property Taxes. – Darin”

  1. Hi Steve,
    Well, ironically it was a year ago today I posted my original question, and I now have an update. The bank ended up paying my back taxes so I avoided a tax foreclosure, but I ended up filing bankruptcy anyway. I filed chapter 7 bankruptcy in July and was discharged on 11/4. I didn’t reaffirm on the house in poor condition, or my car. Now I’m wondering if I make the payments on the house and car, if they’ll still foreclose/repossess anyway since technically I don’t owe the debt. I didn’t actually surrender the house in bankruptcy, just didn’t reaffirm on it and my lawyer never filed a statement of intention w/regard to either. In order to qualify for chapter 7, I included intended mortgage payments/insurance/taxes, otherwise I wouldn’t have passed the chapter 7 means test. My question: If I walk away from this house, will the bank officially “foreclose”, and what if any impact would this have during the “lookback period” of 6 months. Would the court reopen my case and force me into a chapter 13? I guess I’m still up in the air about keeping this house, and it would help to know what the bank might be going to do. Thanks for your help.

    Reply
  2. Hi Steve,
    Well, ironically it was a year ago today I posted my original question, and I now have an update. The bank ended up paying my back taxes so I avoided a tax foreclosure, but I ended up filing bankruptcy anyway. I filed chapter 7 bankruptcy in July and was discharged on 11/4. I didn’t reaffirm on the house in poor condition, or my car. Now I’m wondering if I make the payments on the house and car, if they’ll still foreclose/repossess anyway since technically I don’t owe the debt. I didn’t actually surrender the house in bankruptcy, just didn’t reaffirm on it and my lawyer never filed a statement of intention w/regard to either. In order to qualify for chapter 7, I included intended mortgage payments/insurance/taxes, otherwise I wouldn’t have passed the chapter 7 means test. My question: If I walk away from this house, will the bank officially “foreclose”, and what if any impact would this have during the “lookback period” of 6 months. Would the court reopen my case and force me into a chapter 13? I guess I’m still up in the air about keeping this house, and it would help to know what the bank might be going to do. Thanks for your help.

    Reply

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