Summary: You don’t have to lose property when filing for bankruptcy. Chapter 13 bankruptcy may allow you to catch up on past-due property taxes. Know what to do if you don’t pay your property taxes. Be sure to take action if your home is being foreclosed.

Unpaid property taxes can result in foreclosure. Under certain circumstances, the property owner may have a right to redeem for a limited period of time. Chapter 13 bankruptcy may allow the owner to catch up on the past-due property taxes in some cases.

Can My Home Be Foreclosed if I Don’t Pay My Property Taxes?

In most cases, yes. You should have been mailed a notice each year regarding the delinquent taxes.

What Happens if I Don’t Pay My Property Taxes?

At any time after property taxes become delinquent, the taxing unit can sue to foreclose the tax lien. The suit will be brought for the tax, interest, attorney’s fees, and costs. You may have defenses to the lawsuit such as:

  • Failure to provide the annual notice
  • Statute of limitations
  • Military service (may request a waiver of penalty and interest under certain circumstances)

Contact the tax collector and/or appraisal district for options

Taxing authorities will often work with homeowners and permit them to repay taxes under a payment plan. This may be a cheaper, better solution than filing bankruptcy, especially if the homeowner does not have a mortgage because there are no attorney fees or administrative costs. Generally, a repayment period of up to 36 months may be available. If the homeowner is disabled or over 65, quarterly installment payments may be made. Filing a tax deferral affidavit (look under exemption forms) with the tax appraisal district may give the homeowner even more flexibility on a repayment plan without filing bankruptcy. In certain cases, taxes may even be permitted to be deferred. Deferred taxes will eventually have to be paid by the taxpayer’s heirs. If the taxpayer has a surviving spouse who qualifies for a deferral, more time may be allowed for repayment. The taxing authorities can be very helpful in advising a homeowner what repayment options are available outside of bankruptcy. Contact the tax collector for more information.

Can My Home Be Foreclosed if I Don’t Pay My Property Taxes?

Yes. Don’t do nothing; take action.

Tax foreclosure sales

Once the foreclosure sale is held, the person may be able to redeem the property within six months after the purchaser’s deed has been filed in the land records.

The owner must pay the tax sale buyer:

  • the purchase bid, plus costs
  • any taxes due
  • interest
  • twenty-five percent of the total

If the property is a homestead or land designated for agricultural use when the tax suit was filed, and there is a foreclosure sale, there may be a two-year redemption period in some circumstances. In the first year, the penalty for redeeming is twenty-five percent of all that is owed. In the second year, the penalty is fifty percent of all that is owed.

Chapter 13 bankruptcy may be used to catch up on past due property taxes in some cases. Usually, interest has to be paid at 12% except in certain cases, such as where the homeowner is over 65 or disabled in which case, interest is lower at 8%. Property taxes that come due after the bankruptcy is filed will still have to be paid by the homeowner in addition to the catchup payment made through the Chapter 13 plan. Delaying filing bankruptcy to catch up on property taxes (in the appropriate case), may result in additional penalties, interest, and attorney fees.

Should I use a tax lien lender to borrow the money to pay off my taxes?

There are lenders who will pay the homeowners taxes and then take a lien against the property that has the legal equivalent of a tax lien. These loans can be very high interest and should be approached with caution. If a homeowner makes a tax lien loan, the contract rate of interest (rather than the legal rate of 8 or 12%) has to be paid if a bankruptcy is filed to catch up on the tax lien loan.

When a person falls behind on property taxes, consulting a bankruptcy attorney as soon as possible is extremely important.

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