Utah assesses property tax on both real property and personal property to fund local governments and Utah schools. Generally, personal property used in a business is subject to property taxes as consumer items such as motor vehicles and recreational vehicles are subject to uniform fees. Household furnishings, furniture, and equipment used exclusively to maintain a primary or secondary residence are exempt from property taxation.
While many people believe otherwise, taxes, including property taxes, are dischargeable under certain defined circumstances in a Chapter 7 bankruptcy case. However, keep in mind that property taxes and property tax liens are not the same things and are treated differently in a Chapter 7 bankruptcy case.
The Bankruptcy Code grants priority status to a tax debt that is (1) a tax on property; (2) incurred prior to the commencement of the case; and (3) is last payable without penalty less than one year before the case filing. Taxes that are granted a priority status must be paid in any type of bankruptcy case while any general unsecured debt is dischargeable in Chapter 7 cases.
Thus, even if the property tax debt is pre-petition (i.e., incurred prior to the commencement of the case) but due more than a year before the bankruptcy case was filed, it will be treated as a general unsecured debt and discharged in a Chapter 7 bankruptcy case. Timing is everything when it comes to discharging property taxes.
As an example, If a homeowner files a Chapter 7 bankruptcy case on January 30, 2018, and has any property taxes owed for 2017, they are a priority debt and not dischargeable. Also, any personal property taxes owed for 2016 are not dischargeable, because the 2016 tax debt was (1) a tax on property; (2) incurred prior to the commencement of the bankruptcy case; and (3) last payable without penalty on January 31, 2017, less than one year before the case was filed. Waiting until February 1, 2018, to file his case would have allowed this homeowner to discharge the 2016 property tax.
If you owe state or federal taxes, discuss your situation with an experienced bankruptcy attorney at the Morrison Law Group. You can discuss your tax debt at a free consultation to determine whether any are dischargeable in bankruptcy and whether Chapter 7 or Chapter 13 of the Bankruptcy Code is your best option under the circumstances. Theron Morrison has helped 8,000 people file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.