Refinance and Real Estate Taxes
Are there any services that can assist me with either setting a payment program up with the city?
I believe I am in a financial bind. I am behind in my Philadelphia city Real Estate taxes and don't have the cash to make a one time payment nor do I qualify for a low income payment program. My financial situation is this, retired from the local police dept. collecting a pension (55 years old), I also have a job with a 401K and can borrow on that. There's not much in there but I can probably borrow 3,000. Our home is paid off and we are current with all other bill payments. On the down side I am out of a Chapter 13 which was paid off early but I am concerned about qualifying for a home equity loan which I think is the only way out. Are there any services that can assist me with either setting a payment program up with the city or obtaining the assistance I need to correct the situation before I am really in hot water and loose my home for back taxes. This hasn't begun yet so I want to start straightening this out now.
First, I encourage you to contact the Philadelphia revenue department to discuss the options available to you in repaying this debt. I am confident that the city has no desire to kick a retired police officer out of his home for a delinquent tax bill. If you communicate with the city and express your willingness to repay this debt, hopefully they will be willing to work with you in establishing a repayment plan. If you are able to work out a repayment plan with the city, you can hopefully avoid borrowing money to repay this debt.
If you find that the city is not willing to work with you in establishing a repayment plan, I think that your best option for repaying the debt is a home equity loan. While the bankruptcy appearing on your credit report may make qualifying for a loan difficult, it is possible to find lenders willing to lend money to borrowers with credit problems. The fact that your home is paid off should improve your chances of finding a lender willing to loan you money.
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Since you have no other mortgages or home equity loans on the house, if you default on your new home equity loan, the lender will be able to sell the property and recoup its money without too much difficulty. This fact would greatly reduce the lender's risk in extending the loan. Also, the amount of time that has passed since your bankruptcy was discharged will make a significant difference in the loan you can obtain. As time passes, the negative impact of a bankruptcy filing on your credit score diminishes, so if several years have passed, your credit score may have recovered significantly. The only way to find out if you can qualify for a home equity loan is to apply for loans with several different lenders. I encourage you to visit the Home Equity Resources page of Bill.com and read more about home equity loans. If you submit your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened lenders contact you to discuss the options available to you.
You mention in your question that you are considering a loan against your 401(k) to help repay this tax debt. Depending on the amount of the debt, borrowing money against your 401(k) may work, but you need to make sure that you are borrowing money against the 401(k), not withdrawing money from the account. Many companies will extend loans to employees using the funds in the 401(k) as collateral, which means that the employee is not actually withdrawing money from the fund, and therefore is not be penalized for a premature withdrawal. However, if you are planning to actually withdraw money from your 401(k), I would advise against it, except as a last resort, as taxes and penalties will eat up around 50% of the money you withdraw. From your question, it sounds like the money you can borrow against your 401(k) would not be enough to repay your tax debts. If that is the case, I think a home equity loan is the best available option.
Unfortunately, I do not know of any programs available to assist people with repaying local tax obligations. I believe that your best option is to contact the city directly to work out a payment plan. Hopefully you will be able to negotiate a workable repayment plan with the city, allowing you to avoid borrowing money altogether. However, if you cannot, a home equity loan or a loan against your 401(k) may allow you to repay the debt and save your home.
I wish you the best of luck, and hope that the information I have provided helps you Find. Learn. Save.