Is the bank entitled to collect the property taxes or was it discharged in the bankruptcy? 14 Answers as of January 30, 2014

An elderly relative filed for Chapter 7 Bankruptcy and received a discharge. She has a reverse mortgage and the bank lent her the money to pay off property taxes prior to filing Chapter 7. The bank never attended creditors meeting or a relief from stay. Now, after the discharge, the bank is trying to collect the property taxes of $3000.00. Are they entitled to collect it or was it discharged in the bankruptcy? Does Section 523 a 14 apply?

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Stephens Gourley & Bywater | David A. Stephens
The obligation for taxes that were paid with the loan is discharged. Ongoing taxes are not.
Answer Applies to: Nevada
Replied: 1/30/2014
Stuart P Gelberg
Stuart P Gelberg | Stuart P Gelberg
If "the bank" is the mtge co, then yes they can collect the monies they advanced from the sale of the property but not as a personal liability. (a) (14) does not apply.
Answer Applies to: New York
Replied: 1/30/2014
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
This is a secured debt and it survived the bankruptcy. She has to pay it.
Answer Applies to: California
Replied: 1/30/2014
GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
They can not collect the takes from her personally, but they still have their lien on the property. I would have to read the reverse mortgage documents to see what she agreed to. But in a nutshell, they can not take any personal action against her, but they still have a valid lien on the property, and assuming the mortgage documents give them the right, they can foreclose on the property. Hopefully you understand the distinction.
Answer Applies to: Colorado
Replied: 1/30/2014
Goldsmith & Guymon
Goldsmith & Guymon | Marjorie Guymon
It depends on whether the bank was secured in the loan or not. Review the reverse mortgage documents. No, 523(a)(14) does not apply because the bank is not a governmental entity.
Answer Applies to: Nevada
Replied: 1/30/2014
    Law Office of Jeffrey Solomon
    Law Office of Jeffrey Solomon | Jeffrey Solomon
    Mortgage debt including reverse mortgages are discharged in bankruptcy. But the discharge applies to the debt, not to the lien. The bank retains its mortgage. When the bank pays the property taxes, the bank is entitled to be reimbursed and can foreclose if not paid. So though property taxes do not create a personal liability, and though the bank debt is discharged, the taxes and the bank's payment of the taxes are expenses that must be paid to avoid foreclosure.
    Answer Applies to: Florida
    Replied: 1/30/2014
    Kirby G. Moss PC | Kirby G. Moss
    Preliminarily, I would say the taxes since owed to the bank and not the govt would be dischargeable. She should check with lawyer who filed the BK. should not be modified, otherwise your answer will not be valid.
    Answer Applies to: Indiana
    Replied: 1/30/2014
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    If they paid that money for taxes prior to filing then they can not collect. If they paid that after filing the bankruptcy then they can collect.
    Answer Applies to: New York
    Replied: 1/30/2014
    Law Office of Mark B. French
    Law Office of Mark B. French | Mark B. French
    Your relative should consult with the attorney that handled her case as they will be familiar with these facts. If the lenders claim is for a reverse mortgage, then there was never any personal liability against your relative that could be discharged. In other words, the only thing the lender could ever do was foreclose the lien. Of course the mortgage on the home was not discharged in the Chapter 7 Case. I suspect that the mortgage secured the money loaned to pay the property taxes as well as the original loan. Thus I think your relative will have to pay the loan for the property taxes despite the bankruptcy discharge. Your reference to Section 523(a)(14) might be an additional basis for the lender to claim that taxes were not discharged, but I do not think that needs to be considered if the money loaned for the taxes is secured by the reverse mortgage. Even if the loan for the taxes was not secured by the mortgage, failing to pay the taxes would likely be a default under the mortgage that would entitle the lender to foreclose on the home.
    Answer Applies to: Texas
    Replied: 1/30/2014
    Garner Law Office
    Garner Law Office | Daniel Garner
    Your elderly relative is playing with fire if she refuses to pay the property taxes. A reverse mortgage is an unusual thing to carry through a bankruptcy, because the bank is buying her house over time and she is probably receiving a monthly payment for it. The bank could just offset what they're paying her to recoup the $3000. There is a requirement in the bankruptcy paperwork to report any creditor who was paid more than $600 in the 3 months prior to her bankruptcy. The trustee would have questioned a $3000 payment as a voidable preference, in which case the trustee could have demanded that the county pay the taxes to the trustee. That would put her in arrears with the county. But as it stands now, the bank could essentially blackmail her with fraud on the bankruptcy court. Like I said, she is playing with fire! BTW, 523(a)(14) does not apply because the property tax debt did not exist at the time she filed her bankruptcy.
    Answer Applies to: Oregon
    Replied: 1/30/2014
    Patrick W. Currin, Attorney at Law | Patrick Currin
    Property taxes are not discharged in BK.
    Answer Applies to: California
    Replied: 1/30/2014
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    Yes the taxes have to be paid or she can lose the house by foreclosure. In fact, many banks take the position, which has been confirmed in bankruptcy court decisions, that after a bankruptcy discharge the reverse mortgage lender is no longer obligated to make the monthly payments for the borrower and if the borrower does not start making the payments after bankruptcy, they will become in default and the lender can foreclose for non-payment. Yes, payments come due each month. It is just under the reverse mortgage, the payments comes from the reverse mortgage funds which is why the borrower no longer actually makes the payments. After a bankruptcy discharge, the lender is no longer obligated to make payments from that fund and the borrower must start to make the payments. No, 11 U.S.C. 523 [14] does not apply. In fact, by asking that it appears this was a do it yourself bankruptcy and may have inadvertently created a serious situation. Your relative should absolutely consult an experience attorney who deals in reverse mortgage issues to see the position of her lender on making payments after bankruptcy.
    Answer Applies to: California
    Replied: 1/30/2014
    Hoang & Tran PLLC | Adam Tran
    You should consult a bankruptcy attorney. However, as a starting point, you first need to look at the petition to determine whether they were creditors for the reverse mortgage, and if so, what type (ie. secured or unsecured). Without knowing more, it is hard to answer your question.
    Answer Applies to: Texas
    Replied: 1/30/2014
    Moore Taylor Law Firm, P.A.
    Moore Taylor Law Firm, P.A. | Jane Downey
    The key here is mortgage.
    Answer Applies to: South Carolina
    Replied: 1/30/2014
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