Am I Legally Liable For Property Taxes After Bankruptcy ?

by
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC

When property taxes aren’t paid, your local government authorities attach tax liens. And depending on the type of bankruptcy you file, many of your debts can be erased, including property taxes. But, bankruptcy erases only those property taxes meeting certain age requirements and it does not erase property tax liens.

Erasing Property Taxes
In most cases, property taxes that are at minimum a year old can be erased in a Chapter 7 (liquidation) bankruptcy. Property taxes that are not yet a year old when the Chapter 7 is filed cannot be included in the bankruptcy. A Chapter 13 (reorganization) bankruptcy allows you to pay off your debts over three to five years so you cannot erase property taxes in a Chapter 13 bankruptcy.

Liens From Property Taxes
Bankruptcy cannot erase property tax liens against real property, such as your home. So if you erase some property taxes through bankruptcy, your bankruptcy will not eliminate any property tax liens that exist. If you have a property tax lien against your home, you will likely have trouble selling your home unless you pay off the lien.

Cloud on the Title
Property tax liens have priority over mortgage liens and create a cloud on the property’s title. In fact, a property tax lien that exists on a home after bankruptcy can block the home from being sold until that lien is paid. In most cases, any liens against a home are paid from the proceeds when the home is sold.

Make Sure You Get A Lawyer
Taxes in bankruptcy are a complex issue and you should always consult an experienced bankruptcy lawyer. While you may be able to erase your property tax liability, you cannot erase a property tax lien against real estate unless you pay off the lien. And in Chapter 13 (reorganization) bankruptcy, you must pay all of the property taxes over a three- to five-year period of your repayment plan.