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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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A friend of mines home is overdue on property tax $20K and

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A friend of mine's home is overdue on property tax $20K and CA.EDD wants $18K from him.He is unemployed. No cash. living with relatives.
He owns his home outright and it's worth $100K but scheduled to sell next month at auction for the property taxes. Starting bid is $20K, so it may sell anywhere between 20K to say $50K. If he surrenders his home on the debtors intention form Chapter 7 BK, will all debts be completely gone after his BK either way, or can he be responsible to CA. EDD if the sale of his home comes up shy of EDD's debt? Will he get any money if his home sells for more than his combined debts? What would you do if you were him? Thank you.
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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Customer: replied 3 years ago.

He does plan to consult with a local BK attorney. His house is paid for, he has no lender or mortgage. It is scheduled to sell at auction next month via the tax collector. Collector will get the Tax money at the auction that's why starting bid is $20K. Lets say the house sells for $25K and only $5K is available for the $18K debt that EDD claims they're owed. Can EDD go after my friend after his bankruptcy for the remainder balance of $13K?

Thank you for the additional information. In the scenario you have presented, CA EDD would only received the $5,000 if they had filed a lien on the property. If they had not, any profit would go to your friend. You can find out if there are any liens on a property by going to your local county recorder's office. They will be able to run a lien search and can print you copies of any lien on the property for a fee. Fees at a county recorder's office are typically a few dollars per page.

I hope my answer has assisted you and that you will leave me a positive rating! Please feel free to ask for me by name in your question, should you have any questions in the future.
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