Bankruptcy and real estate taxes: Counties are desperate

Filing bankruptcy gets rid of most of your debts; but it does not necessarily get rid of most of your problems.

For some people, real estate that they already moved out of is a problem.  Filing bankruptcy does not mean the bankruptcy court takes over your house.   Unless the bankruptcy trustee thinks they can sell it and make some money to pay people off, the trustee will abandon the house.  That means, it goes back to you and the bank.

It goes back to you and the bank, meaning you are still the owner.  You are the owner until the bank takes over; and sometimes the bank is in no hurry.   So you still have all the obligations of the owner.  Paying the HOA or condo associations; mainting code standards (like cutting the grass), and paying the real estate taxes.

For several years I’ve told people–be sure you pay the hoa; and make sure you cut the grass; but you can probably ignore the taxes.

Why did I tell people they could safely ignore the real estate taxes?  At the foreclosure sale the county will require the taxes to be paid then, and the county will wait for the foreclosure.

What I’m seeing around here is that the counties are tired of waiting.  In the last two months, I’ve seen two people get garnished for real estate taxes on homes that are sitting empty, waiting for foreclosure.

"I'm changing what I tell people about paying the real estate taxes after bankruptcy."

Why this change?  The counties as desperate.  Counties get a whole lot of their revenue from real estate taxes.  With real estate value down, county revenues are down.  The Obama stimulus plan made up a lot of the gap.  Republicans in 2011 blocked doing more of that.

So the counties are desperate.  And they are starting to garnish the homeowners for the unpaid real estate taxes.   The county needs the money NOW and they don’t have to take your to court to garnish you–they can just do it.

So, should you pay the real estate taxes? Not if the bank is paying, which they often do–even if you’ve stopped paying the bank.

Before you do anything, call the county and see if the bank has paid them.

But if the bank isn’t paying, should you?  It’s certainly the safer choice.

You probably want to make a payment arrangement.  Because if the bank does finally foreclose, then the buyer will have to catch up and you’ll be off the hook.  You don’t want to pay any faster than you have to.

(Of course this reinforces my advice: until there’s an actual foreclosure sale, DON’T MOVE OUT.)

PS  Nothing is more local than county government.  Lots of people all over the country post questions on my website.  And I’m glad to answer what I can.  (Thank you for your interest, too.)  But your guess will be better than mine about what county governments are doing in PA or NV or FL.  I don’t even know anything about Virginia, away from the counties in the DC area.  Sorry.