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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 39045
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Two years ago, my wife and I received a Chapter 7 discharge

Customer Question

Two years ago, my wife and I received a Chapter 7 discharge and did not reaffirm our
home mortgage. We live in Florida, and for the past two years have been going through
the mortgage modification process since our bankruptcy. During this time we have not
made a house payment and are in the final stages of foreclosure with the bank that has our mortgage. My question is: Because of the length of time since my Chapter 7 discharge ( two years ), am I liable for any IRS Tax Liabilities or Mortgage Deficiencies ( back house payments, court costs ect. ) when I walk away from the house?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

Your bankruptcy discharged your personal responsibility for any unpaid loan balance, and if the property is foreclosed before Jan 1, 2013, then federal law will relieve you from any tax liability, assuming that your aggregate loan balance on the property is less than $2,000,000, and the propery is your principal residence during two of the last five years before foreclosure.


Hope this helps.


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socrateaser and 3 other Bankruptcy Law Specialists are ready to help you
Customer: replied 7 years ago.
Does my Chapter 7 discharge cover me with the IRS ( any tax liabilites after two
years since the discharge ) for taxes incurred after the sale?
Expert:  socrateaser replied 7 years ago.

If you're talking about tax liabilities for the property, then yes. If you mean unpaid income taxes since your Chapter 7, then no.


Discharging federal income taxes requires them to generally be three years past due at the date of filing the Chapter 13 petition.

Customer: replied 7 years ago.

I sorry, I asked the question wrong. My house will be auctioned at around $120,000, I owe $450,000 on it right now. Will my Chapter 7 discharge cover me on the taxable

portion of the $330,000 left after the sale???

Expert:  socrateaser replied 7 years ago.
Yes. You will have no tax liability.