In Illinois, Property Taxes are due each year. If a homeowner does not pay their Property Taxes a year after they are due, a lien will automatically arise on their home in order to secure those taxes. Eventually, a home can be sold for delinquent Property Taxes in what is called a Tax Sale, in which a third party acquires a “Certificate of Purchase” on the home. Unlike a foreclosure sale, the owner of the property is not obligated to leave the home and still has time to cure the Property Tax liability with interest, up to three years in some cases to tender payment. The third party’s “Certificate of Purchase” can be best described as a contingent interest, this is because if the tax liability is not cured before the deadline, then the third party acquires ownership of the home, to the demise of the original homeowner who loses the property.
On January 7, 2014, the United States Court of Appeals for the Seventh Circuit confirmed that Chapter 13 Bankruptcy is a method of not just curing the liability on Property Taxes, but also extending the deadline to tender the Property Tax payment. In this case, the Debtors owed Property Taxes, and the house had already been sold in a Tax Sale. The Debtors were successful in having their Chapter 13 plan confirmed and paying their delinquent Property Taxes directly to the county in installments through the Chapter 13 plan. Given the nature of Bankruptcy proceedings and the length of the payment plan, more than three years had already passed between the Tax Sale and the time in which the Chapter 13 plan had been satisfied. The Creditor argued that due to the time-lapse, it had statutorily acquired the rights to the home. The Court disagreed with the Creditor’s argument, stating in pertinent that a Chapter 13 plan may modify the rights of holders of secured claims (in this case the Creditor), and pay the liability over the course of the plan. In addition, the automatic stay protection (protects against any act to obtain possession of property or enforce any lien by the Creditor) applied in this case. Finally, given the Chapter 13 plan was successful, the Court noted that the Creditor’s rights had already been treated for.
It should be noted that in this case, the Creditor did not receive a notice of Bankruptcy from the Debtor, a crucial and costly mistake in many instances. Given the Creditor did not mention this from the start, the argument was considered to be waived. So if you find yourself in this situation, avoid any potential complications and send a notice to the owner of the “Certificate of Purchase” along with your other Creditors. It should also be noted that if the Debtor had failed to satisfy the Chapter 13 plan, the Creditor would have been granted relief from stay, giving it the right to acquire ownership of the property given the time-lapse.
Financial difficulties can make it hard to pay liabilities, especially Property Taxes. Don’t lose your home over Property Taxes, the Northbrook bankruptcy attorneys at the Law Office of William J. Factor are experts in developing strategies to help you keep your home. As always, please do not hesitate to contact our Northbrook, IL Chapter 13 bankruptcy attorneys at (312) 878-6976 for your free, no-obligation consultation!