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Chicago Bankruptcy Question: How are real estate taxes treated in Chapter 7?

Chicago Bankruptcy Question of the Day: How are real estate taxes treated in a Chapter 7?  I love an easy question, but this one is not quite as easy as it appears.

When you file for Chapter 7 bankruptcy protection in the Chicago area and are liable for real estate taxes, there is one simple concept that must be addressed.  This is that the real estate tax debt is attached to and "runs with" the property.  What this means for most people who file for Chapter 7 bankruptcy is that any real estate tax debt owed at the time of filing must be scheduled as a lien against the property and notice must be given to the taxing authority.  If the taxes are more than two years old, then they likely will have been sold to a tax purchaser and notice must be given to them as well.  If it is your intent to keep the property, then the real estate taxes will survive the bankruptcy and must be paid at some point.  If it is your intent to surrender (give up) the property, then the taxes will stay with the property and must be addressed by the purchaser of the property at a foreclosure sale or the tax purchaser will take the property via a tax deed.

There most common hitch in the Chapter 7 process regarding real estate taxes is where the real estate taxes have already been sold to a tax purchaser and the redemption period is approaching.  In a Chapter 7 bankruptcy, the filing may delay a tax deed from being issued, but will not prevent it altogether.  In these situations, if it is the intent of the filer to keep the property, the bankruptcy should be strategically timed to ensure that the real estate taxes can be paid before the redemption period expires.

If you have back real estate taxes and are considering filing for Chapter 7 bankruptcy protection in Chicago, having a qualified and experienced bankruptcy attorney on your side is essential.  A good bankruptcy lawyer will properly schedule and notice the real estate tax creditor(s) and advise you as to your redemption rights on real estate taxes that have already been sold so as to ensure that you keep the property, assuming that is your intent.  The experienced Chicago Chapter 7 bankruptcy attorneys at Ledford & Wu are always willing to offer a free consultation to determine what course of action is right for you.

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