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Properties were foreclosed and I will file for bankruptcy. Am I still responsible for tax leins?

Additional Information:

I owned some rental properties in Braintree that were foreclosed on several months ago. I am getting ready to file for bankruptcy to wipe away the deficiencies. I am still getting bills from various taxing authorities for tax liens on the property.  My question is, since I no longer own the properties and the bankruptcy will wipe away the deficiency, will I still be responsible to pay for the tax liens?

ATTORNEY ANSWER:

Since your questions mentions “various” taxing authorities the answer probably is yes you are likely still on the hook for the taxes owed.  The liens are a mechanism to secure payment only and are generally not dependant on ownership of the subject property.  Had you sold the property in a private transaction, the liens would have had to be satisfied either before the closing, or at the closing and before the proceeds were distributed to you.  It is very likely the taxing authorities will be looking to place liens on other property you own.  If you have the ability to pay a lump sum to erase any of the liens you may be able to negotiate a reduced liquidation payment.  Also, the liens may be able to be removed if you can prove insolvency or in some cases if you file for bankruptcy.

Assuming this refers to Massachusetts State taxes, the back taxes were likely paid by whomever purchased the property at foreclosure – likely the lender/servicer.  For example, say the principal balance of the mortgage was $250K, the arrears plus fees were $15K and the tax lien was $5K, then the foreclosing lender/servicer likely purchased the property at foreclosure for $270K ($250K + $15K + $5K = $270K).  State taxes are always first in line and unpaid taxes have to be paid at conveyance, which includes a foreclosure sale.  The tax lien amount will be included in the total deficiency, which will presumably be discharged in bankruptcy. 

The Braintree Tax attorneys at Beliveau Law Group provide legal services for all real estate matters and transactions in Massachusetts.  The law firm provides legal representation to individuals, businesses and families in the Boston area communities including: Milton, Quincy, Weymouth, Rockland, and Randolph.

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