Can bankruptcy help you catch up on delinquent real estate taxes which have been sold to a tax purchaser? Perhaps, through a chapter 13 bankruptcy. A chapter 13 is essentially a consolidation of your debt. Your debt is combined into one payment which is made each month to a trustee. The trustee then pays your creditors according to the terms and conditions of your chapter 13 plan which generally lasts for three to no more than five years. Chapter 13 bankruptcies are an excellent way for someone to catch up on delinquent secured debts (mortgages, car loans, etc.) without the fear of a foreclosure or repossession. The problem with sold real estate taxes is that the property owner is given a finite period of time in which to redeem or cure the tax delinquency. So, what happens when the redemption period expires during a chapter 13 plan? In Illinois, the issue of whether sold real estate taxes may be cured through a chapter 13 plan is not well settled.
Two sections of the bankruptcy code (11 U.S.C. §1322(b)(2) and 11 U.S.C. §108(b)) that have fostered disagreement between the bankruptcy courts in Illinois. §1322(b)(2) states that a person who files a chapter 13 may modify the rights of secured claimants (i.e. tax purchasers) and cure the tax delinquency through the chapter 13 plan. §108(b) appears to limit the time to cure this type of default to the expiration of the redemption period or 60 days after the bankruptcy is filed, whichever is later.
Their appears to be a trend, though, which allows delinquent real estate taxes which have been sold to be cured through a chapter 13 plan even though the redemption period expires during the chapter 13 case. Naturally, I agree with this conclusion. The purpose of bankruptcy is to give someone a fresh start. There is also a very strong principle in chapter 13 cases to allow people the opportunity to save their homes. Hopefully, there will soon be a consensus among the courts or an opinion from the Seventh Circuit that will resolve this issue.