Property Taxes & Bankruptcy
What is a Property Tax Sale?
If you are unable to pay your property taxes, your home could be subject to a court’s decision that can result in the selling off of unpaid tax debt in an auction. The purchaser of the delinquent tax debt is then granted a certificate which indicates their interest in the property. Following the purchase of the delinquent debt, the homeowner then has a period of time in which they can pay off the remainder of the debt and reclaim their property from the buyer. If they are unable to do so, the buyer will become the property’s new owner.
What happens if you fail to pay your property taxes?
In Indiana, if you find yourself unable to pay your property taxes, a court collector will push for the sale of your delinquent, or unpaid, debt. Rather than purchase the home, the buyer instead is granted a certificate which indicates a property lien.
A property lien represents a security interest over the property, thus granting the buyer the benefit of receiving unpaid debt rather than ownership of the property itself. In a property lien, the buyer is known as the lien holder, and the property’s original owner is referred to as the lienee.
A lien can affect your property in many ways. As a lien on your property can make your claim unclear, it can often get in the way of many potential processes you may wish to undertake, including the sales, refurbishing or refinancing of the property.
The original owner of the property has an allotted amount of time in order to pay off the delinquent debt. In Indiana, this time period is one year. The redemption period can also be extended per a request from the original owner. If they find themselves unable to pay off the debt in this amount of time, the lien holder is then granted a deed to the property following a petition to the Indiana Circuit Court.
Can a tax sale be prevented?
Although they may have a claim over your property, there is still a chance that original property owner can regain ownership. The original owner has up to the date of sale to repay all due costs. Depending on the home’s location, there is a possibility that the original owner will have to pay any costs that may have accumulated prior to the date of sale. these costs may include:
• The amount of delinquent taxes held by the lien holder
• 110% the minimum bid required at the auction to sell the property
• A penalty amount that acts in a similar way to interest and increases every six months
• Total costs payed by the lien holder
If all requirements are met before the set deadline, the tax sale can be prevented and the original owner can regain clear control over the property.
How is a tax sale related to Chapter 13 Bankruptcy?
A little known fact is that declaring Chapter 13 Bankruptcy can halt a tax sale before it occurs. It can also stop the sale after it occurs if bankruptcy is filed during the grace period before all delinquent payments are due. Although property taxes are not dischargeable after filing Chapter 13, your debts can still be paid through monthly payments to your trustee.
Halting a tax sale is possible due to the fact that, when Chapter 13 is filed, the purchaser may not hold an absolute title to it. As such, the original property owner may not have a time limit to pay off the rights to redeem ownership of the property. Thus, a Chapter 13 debtor could be the key to retaining ownership of an original property that is subject to a tax sale.
Are there other ways to prevent a tax sale?
One way in which you can prevent a tax sale is by objecting to your tax assessment. In other words, you can appeal to have your debt halted due to errors on the part of the debt collector.
You can challenge several errors, such as:
• Improper value of your home
• Possible improvements to the home that may have affected the home’s value
• Possible declining of the property’s value due to a lack of recent appraisal on the property
You should also consider the possibility that some or all of your debt can be forgiven through a process called abatement. With proper legal representation, abatement can be granted for a variety of reasons, including devoting all your income to necessary living expenses or medical procedures.
If you find your property subject to a tax sale and need legal aid in retaining it, contact the Law Offices of Moseley & Martinez for help today! We can give you the legal representation you need! Call today for a consultation and case review.