Before I get started, I will point out that we cannot give legal advice on here, only information, and telling someone which chapter of bankruptcy to file constitutes legal advice, so I cannot do that. But, I can give you information which will help you know what options are out there and help you formulate questions to ask an attorney if you decide to file bankruptcy.
There are several Chapters of bankruptcy, but realistically most people file one of two chapters: 7 or 13.
If you want to keep the house but you cannot catch up property taxes, you could potentially file Chapter 13
, which is where you make payment to the Bankruptcy Court
for 3 to 5 years in a Chapter 13 Plan. This Chapter allows you to cure back property taxes through the Plan, and the county cannot sell your home at a tax sale when you are curing property taxes through the Plan. Another advantage (or disadvantage as it may be) is that all back income taxes also get paid through the Plan, and when back income taxes are being paid through Chapter 13, the IRS
/State CANNOT add on additional penalties and interest after the Chapter 13 is filed (an advantage you do not have outside of bankruptcy or in Chapter 7
). However, I said it might be a disadvantage because you are REQUIRED to pay the income taxes in full through the Plan, and if the tax liability is gigantic, this may not be feasible to do over a 3 to 5 year period, so it may effectively wipe out your ability to file Chapter 13.
If you do not want to keep the house, then curing the property taxes is not such a big issue, so Chapter 7 might work. It is quick and comparatively cheap, and wipes out all of your debt which is dischargeable. Income taxes less than three years old are typically NOT dischargeable, so if you filed Chapter 7 you could wipe out all your debt and end up only owing the income taxes, while the property taxes, lawsuits, credit cards, mortgage, etc would likely be completely discharged.
You could also file Chapter 7 and keep the home as long as mortgage payments are current, but you would have to catch up the property taxes on your own relatively quickly, and you would have to set up payments on the income taxes with the IRS/State and pay penalties and interest. But, Chapter 7 would get the unsecured creditors off your back which might free up enough money to make this feasible, which is normally cheaper than Chapter 13 in terms of attorney fees and court fees, but may end up costing more if you have to pay a lot of penalties and interest on the taxes.
Another factor is that you normally have to be current on a mortgage to file Chapter 7 and KEEP the house, whereas you don't in a Chapter 13 since if the mortgage is behind, you can cure it through your Chapter 13 Plan.
Unsecured debt (credit cards, collection lawsuits, medical bills, etc) are all wiped out in either Chapter 7 or Chapter 13, so these won't likely matter as to which chapter you decide to file. Once they obtain a judgment against you, the judgment attaches to real estate you own as a lien, but these liens can normally be wiped out in either Chapter 7 or Chapter 13 as long as you file the appropriate motion during you case, which your attorney should take care of (see 11 U.S.C. 522(f)).
Read more about Chapter 7 vs. Chapter 13 by going HERE
If you decide not to file bankruptcy, you can try to settle the unsecured debts, but you have to have cash to do this. They will often settle for around 40% if you have a lump sum to pay them, and you negotiate the settlement - and get it in writing - BEFORE sending them the money. You can also try credit counseling, but if they are already suing you this may not be very effective at this point. Neither of these options will help you get the property taxes cured though, and if they get too behind the county could do a tax sale.
Again, I don't know all the details (and the devil is in the details) and even if I did I could not advise you what to do in this forum, but I think you may benefit from consulting with a bankruptcy attorney since it may make your life A LOT less stressful and set you up under a budget and payment where you know everything is getting paid and you can sleep at night (which is exactly what the Bankruptcy Code
is for - honest people who had something bad happen).
I know I covered a lot of info, and I'm sure I missed some angles or didn't explain everything clearly, but making these decisions - and discussing these options - is a lot more complicated that you would think. I typically meet with clients for multiple hours and review several documents (taxes, pay stubs, profit and loss statements, tax assessments, bills, lawsuit paperwork, bank statements, etc) to help a client decide, so figuring anything out definitively with a few sentences to go on is impossible. BUT, I think I know enough to say: see a lawyer.
If you have any other questions or if something I wrote doesn't make sense, please let me know and I will be happy to try to clarify.
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