Selling Property

[nohope]

Who is guaranteed to get paid from the proceeds of a house in a Chapter 7? The mortgage? Student loans? IRS? Other liens on the property?

[tobee43]

if you are in an asset chapter 7 most likely the trustee will distribute the proceeds as they see fit....

it's RARE anyone has equity today, but some do

someone else may have experienced different, but the only person i know that had equity the trustee took the proceeds and did the distribution the way that saw fit...( and by the way the irs was left out, so that person was still holding a 250 lien with the irs after the distribution) YUCK!

[nohope]

That's scary - I thought the IRS was one of the first to get paid. I have about $350K - 400K in equity in my house -if I only knew a few years ago what I know today...

[tobee43]

That's scary - I thought the IRS was one of the first to get paid. I have about $350K - 400K in equity in my house -if I only knew a few years ago what I know today...

well that situation was extremely complex...which child support issues...business issues...hidden assets etc....

with that much equity .....is there any way you can work out your debt???? in today's market that's an incredible amount to have ...really.

also....someone may have known of a "different" experience about the IRS payments....i know this person is STILL paying the IRS and and no monies were handed over by the trustee in THAT case....remember...every case is different.

and don't be scared....as bad as this is....you will see the light at the end of the tunnel......ok....i'm not kidding with you, it may be an awfully LONG tunnel...none the less....there will be light left for you....you just have to hang on...

of course not knowing or understand the totality of your situation it's difficult for anyone really to predict what will or will not happen....best of luck!!! and keep posting....we have some resident atty's that are excellent and may clime in with more info for you!

[despritfreya]

Chapter 7 distributions in this order:

1. All encumbrances on property including any tax liens
2. Closing costs and commissions
3. Debtor up to that allowed exemption
4. Trustee for the statutory fee allowed
5. Trustee's lawyer, if any
6. Priority creditors in this order - delinquent support obligations and then taxes that meet the definition of priority.
7. General unsecured creditors who timely file claims
8. General unsecured creditors with late filed claims
9. Balance to debtor if there is anything left over after all claims are paid in full (solvent estate).

Please note that unless the estate is solvent, interest will not be paid on the tax claims therefore, to the extent interest accumulates post petition you will have to deal with it.

Des.

[HHM]

The technical answer is, priority debts are paid first. Priority debts are found in section 507 of the bankruptcy code.

However, in a chapter 7, the creditor needs to file a proof of claim to get paid. I have seen people who had Priority Tax Debt in an Asset Chapter 7, the IRS did not file a proof of claim, and the idiot, cheap attorney, (and the person was an idiot paying for a cheap attorney) never filed a proof of claim on behalf of the IRS. So, the money went to other, lesser priority creditors, BK was discharged and BAM, the person still owes the IRS.

Essentially, it works like this (note, there are a slew of priorities, but many are related to businesses, so for the average individual...)
If the item being sold has a secured lender (like a house with a mortgage), the secured lender is paid first, (but that has nothing to do with BK law, that is the security interest at work).
1. Child support arrears
2. Priority tax debt (not all tax debt is priority)
3. Debts related to death or injury due to operating a motor vehicle while under the influence
4. Everything else. (credit cards, student loans, lines of credit, etc).

[tobee43]

HIT the nail on the head............

it was the atty's fault...and i just didn't want to say it....but it was an expensive atty...so no one is safe...

by the way this person current payment to the irs is 20k monthly.....so i'm not really full of pity...my heart doesn't really ache that much...

[tcreegan]

Hi all,

HHM and Des, how does the debtors exemption amount factor in? Where does the debtor fit into the payout scheme?

Thanks,

Tom in Colo

[justbroke]

HHM and Des, how does the debtors exemption amount factor in? Where does the debtor fit into the payout scheme?

Des just listed it above. The debtor is third in line.

[tcreegan]

......arrrgh

....man is it time to get new glasses or what....

Thanks justbroke!