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Property Taxes and Bankruptcy

Many debtors behind on both their mortgage and property taxes wonder if bankruptcy can be used to stop a property tax sale of their home.  Fortunately for debtors facing a property tax sale of their home, bankruptcy can be used to stop the sale if they move quickly. Here’s what you need to do:

  1. Before filing for bankruptcy, find out if there is a property tax lien on your home. In the state of Texas, ad valorem taxes are given the highest priority of all liens and if property taxes are owed, by January 1st of each year, a lien will be placed against the home.
  2. Find out how much you owe on your property taxes before you file bankruptcy.  Are you able to pay cash for this amount to have the lien removed?  If it is a small amount and you need the lien removed because you are trying to sell the property you may want to consider paying off the lien immediately.  However, you may not want to do this if you are considering filing Chapter 7 or Chapter 13 bankruptcy soon.  Speak with your bankruptcy attorney before you pay off the property tax lien to find out how it might impact your bankruptcy case.
  3. Work with your bankruptcy attorney to determine which type of bankruptcy is a good fit for your financial circumstances.  If you file a Chapter 13 bankruptcy you will have an opportunity to pay off your lien over a 3 to 5 year period. However, the lien will not be removed from your records until it is fully paid.  If you decide to file Chapter 7 bankruptcy and the lien is paid off fairly quickly then you will receive the benefit of having the lien immediately removed from your records.