As most of us know, one of the joys of home ownership is that the homeowner has to pay property taxes.  These taxes help fund things like schools and parks. The amount of tax owed is generally based on the assessed value of the home.  Most mortgage contracts require you be current on your property taxes, and many times the mortgage lender will collect the property taxes through regular monthly mortgage payments.  If there is not enough in escrow to pay the taxes or if the taxes are not paid by the mortgage company, it is the homeowner’s responsibility to pay the taxes himself.

Problems Paying Property Taxes

Falling behind on your property taxes could cause several problems.  First, the taxing authority could sell your home in order to satisfy the debt.  When a homeowner is delinquent on property taxes, the amount delinquent- plus interest, penalties and costs- becomes a lien on the property, and the taxing authority can sell the property to satisfy the lien.  Since you are also likely in breach of your mortgage contract, the mortgage holder could foreclose for your failure to keep current on the property taxes.  Additionally, many times when a person is behind on property taxes they are also behind on mortgage payments, which causes additional issues. If you find yourself in this position, a Chapter 13 bankruptcy can help prevent foreclosure or a tax sale and can help you pay your back property taxes.

Property Taxes Not Dischargeable

Property taxes are not dischargeable in bankruptcy, but Chapter 13 can help still help with unpaid property taxes. In a Chapter 13 case, your debts are paid through a monthly payment you make to the Chapter 13 bankruptcy trustee.  The Trustee receives your payment, then distributes the money to your creditors.  If you owe back property taxes, those taxes can be included in that distribution and be paid in full through your Chapter 13.  Chapter 13 will also give you the benefit of the automatic stay, which prevents collection activities – like foreclosure- against a debtor.  A Chapter 13 case will give you a longer period of time to pay the back taxes and give you some breathing room while you restructure your debt and pay back your property taxes.

If you have gotten behind on your property taxes, we can help.  Please contact one of our offices and set up a free consultation with an experienced attorney.

Kathryn Davis
Written by Kathryn Davis

Kathryn Davis is an attorney at the Bond & Botes Law Offices in Huntsville and Decatur, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from Samford University, Cumberland School of Law. She is passionate about utilizing the bankruptcy process to help clients navigate through what is usually some of the lowest points in their lives. Read her full bio here.

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