Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.
He would mark that he wants to surrender it.
The bankruptcy trustee can step in and sell it to pay his creditors as well.
The bankruptcy will discharge the tax debt owing, as long as he lets the house go.
He can list the tax debt on schedule D, and mark surrender on the statement of intent.
Then the trustee can decide if it is worth selling to pay the creditors.
Would he mark 'Claimed as Exempt' or not?
That's 'Not claimed as Exempt' on the Statement of Intention
Will DB still be entitled to any proceeds after the auction or sale?
It would be dependant on any exemptions that he may be using. If there is equity after subtracting the exemption and the taxes and any mortgage balance from the value, then he would select 'not claimed as exempt'
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