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Debtor May Redeem Property That Was Sold At Tax Sale Through Chapter 13 Plan

On Behalf of | Jun 21, 2016 | Bankruptcy |

In the recent case of In re Gonzalez, 2016 WL 2944281 (Bankr. E.D. Pa. 5/19/16), the court allowed the debtor to redeem her real property that was sold at a tax sale through her Chapter 13 plan. In this case, the city sold the debtor’s home for unpaid real estate taxes on May 21, 2014 to a third party purchaser. The Debtor filed for Chapter 13 on January 19, 2015. The plan was later amended to provide for the payment of the tax lien to the third party purchaser. The purchaser objected to the plan. The court considered whether the debtor could redeem her property though her plan and indicated that to do so the plan must provide that the purchaser’s claim be treated as a secured debt. If it was treated as a secured debt, then bankruptcy law would trump state law and would permit the claim to be paid through the plan.

As long as the case was filed during the state’s redemption period, the court found the debtor could redeem the property. In Maryland, a homeowner can redeem the property up to six months after the tax sale. During this time the homeowner can pay off the tax debt and prevent the purchaser from getting title to the property. If the homeowner does not have sufficient funds to pay off the entire tax debt during this time, one solution would be to file a Chapter 13 case and pay the tax debt though the Chapter 13 Plan.

If you are considering filing for bankruptcy and have questions and concerns about how your property will be treated in your bankruptcy case, please contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at 301-816-1600. Our website address is: