Yearly Reminders

As we get our feet firmly planted into 2017, this is a courtesy reminder of periodic changes…

  1. If you own real estate and your bankruptcy case is not yet filed, you will need to provide a copy of your 2016 property tax bill (which would have been issued in December 2016).  If you previously submitted your 2015 tax bill, it is no longer useful.
  2. Although 2016 income tax returns are not due to the IRS and Wisconsin Department of Revenue until April 2017, Chapter 13 cases filed after December 31, 2016 cannot be confirmed until the 2016 tax returns are filed.  So, if you’re expecting to file a Chapter 13 case in the near future – file your 2016 tax returns ASAP.
  3. If you are filing Chapter 7, you should provide a copy of your 2016 tax returns if they are filed before your bankruptcy case is filed.  2016 tax returns will be required for any bankruptcy case filed after April 15, 2017.
  4. The winter moratorium on power shut-offs ends on April 15, 2017.  If you are delinquent on paying your utility bills, talk to a bankruptcy attorney now and get your case ready to file ASAP.  Do not wait until April to decide you need to do something – you won’t be the only person rushing to file to avoid a shut-off.

End-of-the Year Reminders

  • Debtors who have not yet filed for bankruptcy and own real estate – you should be receiving your 2014 property tax bills within the next couple of weeks.  If you have previously submitted your 2013 property tax bill to my office for review in preparation to file, be aware that you should update your file with the 2014 tax bill once received.  This will be mandatory on or after 1/1/2015.
  • Debtors who have not yet filed for bankruptcy but intend to file under Chapter 13 – if you hope to file in early 2015, be advised that Chapter 13 Plans cannot be confirmed without the current year’s tax returns on file.  Even though your 2014 taxes are not due to the taxing authorities until 4/15/2015, they will be required for confirmation of your Chapter 13 Plan if you file on or after 1/1/2015.
  • Debtors who have already filed Chapter 13 Bankruptcy – remember to submit your 2014 tax returns to my office so I can relay them to the Chapter 13 Trustee.  Those of you who are required to – remember to submit one-half of your income tax refunds.  If you’re not sure whether you have that requirement, call my office or consult the most recent version of your Chapter 13 Plan.
  • If you have defaulted on your energy bill during the more expensive winter months, remember that the winter moratorium ends on 4/15/2015, after which, your utilities can be disconnected.  If you need the bankruptcy stay to prevent a utility shut-off, please consult with me well before 4/15/2015.  Bankruptcy cases take time to prepare, and you’re probably not the only person who will be facing a shut-off.  Also remember that Chapter 128 is no longer a viable option to stay a disconnection of utilities.

Property Taxes

In the majority of home foreclosures where the homeowner decides to surrender the property, they are not responsible for the property taxes owed on it.  Whoever purchases the property ends up paying the taxes.  Often, it’s the foreclosing mortgage lender, and they either absorb the cost or pass it along in the purchase price when it gets resold.  Thus, creating the general maxim: property taxes follow the property.
But this isn’t always the case.  Here’s a cautionary tale, from when two parties on a land contract agreed that the tenant/buyer would be responsible for paying property taxes, rather than the landlord/seller.
As legal title of the house remained with the seller until the land contract reached maturity, the landlord remained liable to the county, notwithstanding the land contract agreement.  The seller then paid the property taxes, and then filed a claim in the buyer’s Chapter 13 bankruptcy case (in which, the buyer decided to abandon the land contract and moved somewhere else).
11 U.S.C. § 523(a)(14A) makes non-dischargeable any debt that was incurred to pay particular kinds of taxes, referencing § 523(a)(1).  Most commonly, this discourages people from using credit cards (which are non-dischargeable) to pay off tax debt (which is non-dischargeable) and sticking the credit card company with the bill.
Next, § 523(a)(1) references § 507(a)(8).At § 507(a)(8)(B) we have: a property tax incurred before the commencement of the case and last payable without penalty after one year before the date of the filing of the petition. 
So, where does this leave us?  In the particular case described above, the portion of property taxes that the landlord/seller paid on behalf of the tenant/buyer, the portion of which was due within 365 days of the date the bankruptcy case was filed – that becomes non-dischargeable.
Why doesn’t this happen all the time?  Because in Wisconsin, the mortgage company almost always folds the property taxes into the mortgage, and waives their right to collect a deficiency.