Bankruptcy can help with your property taxes, either by allowing you to write off your other debts or by buying you more time to catch up with paying your debts.
Since Texas has no state income tax, homeowners pay relatively high property taxes. Property tax is the biggest single source of funding for all local governmental services.
If you fall behind on your property taxes, you will be charged penalties of up to 12 percent plus interest at 1 percent each month. You could also be sued to collect the tax, which adds another chunk of penalties and costs. Or your property could be sold at auction to pay the taxes. (See the Texas Window on State Government website for good basic information on real property taxes.)
DISCHARGE YOUR OTHER DEBTS SO YOU CAN PAY YOUR PROPERTY TAXES
Assuming that you want to keep your home but that you’ve fallen behind on your property taxes, then most likely your income has not been enough to meet your expenses, including payments on your debts in general. Sometimes just writing off your other debts will do enough to allow you to catch up on your property taxes. Some taxing entities will let you catch up with payments over 36 months. So you should find out if that option would be available to you and if you could afford this. If so, a Chapter 7 regular bankruptcy may provide what you need.
USE THE SPECIAL POWERS OF CHAPTER 13 TO TAKE CARE OF PROPERTY TAXES
But you may not be able to get a feasible installment payment plan for a number of reasons:
- You are unable to afford the monthly payments required.
- A payment plan is not offered by your tax collector.
- The collection process has gone too far to be eligible for a payment plan.
- You have already tried a payment plan but could not pay it on time.
- Your mortgage lender is insisting that you bring the taxes current much more quickly.
Under the Chapter 13 “adjustment of debts” type of bankruptcy, you can catch up on your property taxes over a period as long as five years. This reduces each month’s installment payment, making it more manageable. And during that time the taxing authorities would not be able to take any other collection activity – saving you both worry and those extra costs – as long as you fulfill the terms of the court-approved Chapter 13 plan.
Chapter 13 also can often allow you to pay your back property taxes relatively quickly in order to minimize the accruing interest and penalties. This is because your plan can sometimes allow you to delay paying other important but somewhat less powerful creditors, such as the IRS or a spousal support enforcement agency, while you catch up on the property taxes.
Also, when you are behind on property taxes, that usually means you are simultaneously behind on your mortgage payments. Chapter 13 can be an excellent way to catch up on your mortgage, because you can also stretch out your mortgage catch-up payments for up to five years. During this time, as long as you meet the terms of your plan, you and your home will be protected from foreclosure or any other collection efforts by your mortgage company.
The attorneys at The Law Offices of Roger Fuller can help you preserve your home and take care of your property tax debt, whether through a Chapter 7 bankruptcy or a Chapter 13 one. We can give you the peace of mind that comes when you understand your options. So please schedule a no-obligation, free, confidential consultation with us. You can either call 214-516-6187 or contact us here.