Question: Does a chapter 7 bankruptcy cover property taxes?

Answer: Bankruptcy deals with secured debts in a different way from unsecured debts. A secured debt includes personal liability and a lien on certain property, and bankruptcy discharges only the personal liability. Delinquent property taxes are essentially secured debts because they include both personal liability and a lien on the property that was the subject of the tax.

Bankruptcy does not discharge your personal responsibility to pay the property taxes, unless your property taxes became due at least one year before you filed for bankruptcy. While bankruptcy may discharge personal liability for delinquent property taxes, it does not discharge the lien attached to the property. This means that the property is still subject to foreclosure even though you have no personal responsibility to pay the delinquent taxes.

Property taxes are an automatic lien on the subject property, and that lien remains on the property until the taxes have been paid in full. A lien affects the marketability and title to the property. You typically can't sell or refinance until the property tax lien has been paid off.

Contact Attorney Cathe Evans Williams of The Evans Williams Law Group at 708-991-7110 if you have any additional questions.