The Background:
Most people who get a mortgage on their home pay an “escrow” to the mortgage company or bank. They hold the money in an escrow account to pay the real estate taxes and sometimes the property insurance also. That way, instead of trying to pay a hefty amount every 6 months, they can pay a smaller amount each month, eliminating problems of forgetting or not having enough saved to pay the real estate taxes.
Many homeowners either don’t have escrow accounts set up, or have a house that’s paid in full, and pay their taxes on their own every 6 months. Sometimes the homeowner will fail to pay the taxes to the county. In Illinois, the tax sale process allows a “tax buyer” to pay the county the taxes that the property owner didn’t pay. Then, the homeowner has 2 years to “redeem” the taxes by paying the tax amount plus interest and penalties. If the homeowner doesn’t redeem the taxes in time, the tax buyer can apply for a deed to own the house!
What can you do if you, the homeowner, didn’t pay the taxes when they were due? Before the redemption date, you can pay the taxes plus interest, and still keep your house. But, if you can’t pay the full amount, bankruptcy may be able to help you.
Can a Chapter 13 Bankruptcy give you time to pay the taxes beyond the redemption date? Maybe. As of now, only some bankruptcy courts in Illinois allow the homeowner to spread the payments for the sold taxes over the 3 to 5 year plan. A recent US District Court decision gives homeowners more hope with In Re LaMont, (ND Ill. 12/27/2012, 2012 WL 677404) allowing the homeowners to pay their sold taxes and extend the time to pay through the Chapter 13 plan. Also, Judge Baer in the US Bankruptcy Court, in the Romious, and Watts cases followed this decision in January, 2013. However, that doesn’t settle the question. Other bankruptcy judges in the Northern District of Illinois have ruled that the homeowner cannot pay the sold taxes after the redemption date, even during a Chapter 13 plan. The tax buyer may appeal to the US 7th Circuit Court, and, only after a 7th Circuit decision would there be one answer to the question.
In the meantime, as a homeowner, if you have a problem paying your real estate taxes, you need to call an experienced bankruptcy attorney to discuss your whole financial situation, and your best option. This is a very important and complicated issue, and the right attorney makes all of the difference. I have successfully represented many homeowners who have real estate or property tax issues to solve. And, there are strict time deadlines, so you need to act right away or you could lose any chance of saving your house.
Daniel J. Winter
BankruptcyLawChicago.com
Djw@DWinterLaw.com
312-789-9999
Offices in Chicago, Oak Lawn, Skokie, and Waukegan, Illinois
