I am a bankruptcy attorney and I would be happy to assist you. Use of this service does not create any attorney client relationship. Information provided is not the practice of law but intended merely with information and to direct you in finding an attorney in your locale.
Your friend should consult with a bankruptcy attorney in his area, regarding the filing of a Chapter 7 bankruptcy. Consultations for bankruptcy are typically free.
With regards XXXXX XXXXX stated debts in bankruptcy, CA EDD is non-dischargeable in bankruptcy. Taxes due for property are also non-dischargeable; however, if the home is sold or foreclosed upon, it is possible that the lender may pay the property taxes in order to sell it. It varies in each situation, so he will need to wait and see what happens after the sale. If the taxes are not provided for in the sale by the mortgage company, that debt is also non-dischargeable.
If the debtor surrenders the home and claims the mortgage in his bankruptcy, any deficiency will be discharged in his bankruptcy. If instead there is a profit on the sale, then the mortgage company must pay the property taxes, before releasing any funds to him. If CA EDD has recorded a lien on the property at the County Recorder's Office, then they would also receive any profit after the property taxes were paid by the mortgage company, and anything left would then go to him. A homeowner has an exemption of up to $100,000 in equity
(profit), but the property taxes and CA EDD (if there is a lien) would be paid first before he could keep the rest, even in bankruptcy.
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