Property Taxes paid with CC

[debt09]

Hello, just got a letter from my attorney that one of the credit card companies found out about taxes I paid with a CC and they are saying I never paid the bill after it was charged? This was at the end of 08. Not quite sure if I paid some or any of the bill can't see statements? Now they are asking that I show proof of payment on the CC? The taxes paid that day were for two properties, one is already being surrendered and doing a short sale (rental property) and the other trying to do a loan modification in (primary residence), which is high unlikely? Eventually the primary property will be short saled too. These charges were over two years ago and I stopped paying all CC for like a year in half or so before finally filing BK7 last Nov. 2010. Now getting close to discharge, if I can't find proof or I didn't pay them after charging the CC what is going to happen? They are claiming it non-dischargeable? Please advise thank you.

[frogger]

Talk is cheap. Perhaps the charges are non-dischargeable, perhaps not. I wouldn't do anything unless they file an ap.

[despritfreya]

To be non-dischargeable under 11 USC 523(a)(14A), which refers back to 507(a)(8), the property tax that was paid had to be for a tax that was "incurred before the commencement of the case and last payable without penalty after 1 year before the date of the filing of the petition".

I am not sure what this means as the language is convoluted. I think the tax had to be due within 1 year before filing. So, when was the last day on which the property tax was due before any late fees would be incurred? Was that date more than 1 year before filing? If so, I think the creditor has no claim. . . but again, I am not positive.

I do not believe the creditor has to file an adversary if the payment falls under 523(a)(14A). It is simply non-dischargeable.

Des.

[tcreegan]

Hi all,

Des, isn't the credit card debt still unsecured debt no matter how the $$ was spent? Unsecured and dischargeable, no?

2 year old cc debt, it would be tough to prove fraud...and the burden is on the creditor, debtor merely defends.

Good luck w/ this debt09,

Tom in Colo

[despritfreya]

isn't the credit card debt still unsecured debt no matter how the $$ was spent? Unsecured and dischargeable, no? 2 year old cc debt, it would be tough to prove fraud...and the burden is on the creditor, debtor merely defends.

Tom,

Fraud is not going to be the issue here. Under 523(a)(14A), the use of the card to pay the property tax (if it was within the requisite time frame) is non-dischargeable. At first I thought the section only applied to a priority tax claim like payment of income tax and I began drafting a response that the cc company was wrong. But as I read the provision, the second part of (a)(14A) specifically talks about property taxes but the language is confusing as to how old the tax would have been on the date of filing.

Des.

[tcreegan]

....well I'll be dipped, 11 USC 523(a)(14A) seems to be cut 'n dried...use credit to pay off a non-dischargeable debt and that credit becomes non-dischargeable.

I guess the moral is if you are going to rob Peter to pay Paul, make sure Peter isn't non-dischargeable first...

Thanks des,

Tom in Colo

[despritfreya]

....I guess the moral is if you are going to rob Peter to pay Paul, make sure Peter isn't non-dischargeable first..

Tom,

What a clever comment. Put a smile on my face

Des.

[enuffznuff]

So just to make sure I understand, it reads to me like the law is saying that the last day you could have paid the taxes without a penalty had to be at least one year before filing, yes? So if the tax was due 2 years ago, but you could've paid it with no penalty until 6 months ago, you have a problem. However, if a penalty would have been incurred 2 years ago if not paid, you're fine.
Does that sound right?

[despritfreya]

it reads to me like the law is saying that the last day you could have paid the taxes without a penalty had to be at least one year before filing, yes? So if the tax was due 2 years ago, but you could've paid it with no penalty until 6 months ago, you have a problem. However, if a penalty would have been incurred 2 years ago if not paid, you're fine. Does that sound right?

I believe this to be a correct assessment of the very convoluted language Congress chose to use.

Des.

[debt09]

Hello, thanks for the responses. However, the property taxes were paid before they were due on Dec. 10 2008, with the CC. Although, a large portion of the CC charges were paid off? A couple months later stopped paying CC completely in 09. Now the creditor is saying the property taxes were never paid using the CC? Thanks.