Personal bankruptcy and property taxes. Are they discharged?
Are Property Taxes Discharged in Personal Bankruptcy?
If you’re thinking of filing for personal bankruptcy, you’ll need to ensure you understand every aspect of the process.
As one of the most serious forms of debt resolution, bankruptcy can have a major impact on your finances, ability to borrow credit and your professional standing.
Although bankruptcy can be a viable and effective way to reset your finances, it should never be entered into lightly.
One of the things you’ll need to consider, for example, is personal bankruptcy and property taxes.
Are they discharged?
Before you can assess the impact personal bankruptcy has on property taxes, however, it’s vital to look at this form in more detail.
Although all homeowners are liable to pay property tax, few people really understand the implications of falling behind with your payments.
What is Property Tax?
As a homeowner, you’ll need to pay property tax to the relevant municipality.
They are a charge on the property upon which the tax is owed, which essentially makes them a form of secured debt.
If you don’t pay your property taxes on time, a charge is placed on the property by the municipality.
This basically confirms that the municipality has an interest in the property.
A mortgage is another common form of property charge and one that you might be more familiar with.
It is simply a way for a third-party to record their interest in the asset.
However, if you fall into property tax arrears for three years, the municipality can seize the property and sell it to recover the funds they are owed.
Are Property Taxes Included in Personal Bankruptcy?
As property taxes are a form of secured debt, they are not automatically discharged when you file for personal bankruptcy.
However, if your property is sold as part of the bankruptcy proceedings, the property taxes will be paid via the proceeds of the sale and the debt will, therefore, be settled.
Alternatively, the municipality may act on their right to sell and seize your property if you are three or more years behind with your property tax payments.
Of course, if you are able to resolve your financial problems and pay off your property tax arrears, you will be able to retain ownership of your home, providing it is considered to be an exempt asset for the purposes of your personal bankruptcy.
Should You File for Personal Bankruptcy if You Have Property Tax Debts?
Whether or not you have property tax debts isn’t the only issue to consider when deciding whether or not to file personal bankruptcy.
However, it is an important element of your financial situation and one that should be considered carefully.
When discussing your options with a bankruptcy trustee, ask them how you can reset your finances so you are able to pay off your property tax arrears and keep your home, even if you do decide to file for bankruptcy.
To learn more now, speak to a trustee with Bankruptcy Canada at (877) 879-4770.