What Happens to State and Local Property and Excise Taxes in Las Vegas Bankruptcy? | Haines & Krieger

When it comes to taxes in bankruptcy, most people are concerned with federal income tax arrears. Those can be discharged in Chapter 7, provided you’ve met the proper conditions (such as the tax debt being more than three years old). It’s not always easy to meet them as the federal government doesn’t like to let people off the hook for paying taxes, but the debts are dischargeable nonetheless. By contrast, state and local governments use different types of taxes to collect revenue, especially Nevada, which doesn’t have an income tax and gains most of its revenue from sales and property taxes. The question is, what happens to excise taxes and property taxes in Las Vegas bankruptcy?

·       For the most part, Nevada does not send out “assessments” to residents for excise taxes for things like owning movable personal property, like an automobile. If it did, then the tax would begin on the date of the assessment, and if that date was more than three years before you filed your petition, then the assessment would be discharged. For the most part, however, sales and excise taxes are assessed (and paid) at the time of sale.

·       Property taxes, by contrast are a different matter. These taxes are assessed by the government and landowners receive the bill for them. However, because real property is immobile, the government considers it a lien to ensure you pay taxes on them. If you do not pay them, the government will add interest them and then foreclose on you. Otherwise, you will either pay the tax when the property is sold, or the subsequent buyer will if it’s sold in a foreclosure sale. Importantly, because property taxes are liens on your property, they are not dischargeable in Chapter 7 bankruptcy, and they will be given priority in a Chapter 13 repayment plan.

Not all creditors are created equal, and the bankruptcy code protects some of them more than others. The IRS and state and local revenue authorities are given priority over most other creditors and will receive payments out of the bankruptcy estate or your payments on your repayment plan before most others. Hiring an experienced Las Vegas bankruptcy lawyer will help you craft the best solution to your debt problem if the government is one of your creditors.

For more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.