Debts
What happens to unpaid property tax in bankruptcy?
Bankruptcy can deal with the personal debt, but it does not by itself clear a tax lien on the property. Recent property tax is a priority debt: a Chapter 7 discharge does not cover it, and a Chapter 13 plan must pay it in full. Where the tax is backed by a valid lien on the home or land, the lien remains after the case unless the tax is paid or the lien is removed.1 2 3 4 5
Connect to a bankruptcy lawyerBack property tax raises separate questions about the debt and about any lien on the property. This guide explains which tax is a priority debt, what each chapter does, and what to check first.
General information, not legal advice. Rules and amounts change; check with a lawyer or the court before you act.
In this guide
Why does property tax raise more than one question?
A bankruptcy discharge releases you from personal liability for certain debts. A lien is different: it is a claim on a particular piece of property, and the federal courts list tax liens among their examples of secured debt.5 6
A valid lien that is not removed in the bankruptcy case stays on the property afterward, and the creditor may enforce it to recover the property. So even where the personal debt is discharged, a lien for the same tax can remain.5
Whether unpaid property tax becomes a lien on your property, and when, is set by state and local law. Your county or city tax office can tell you what is recorded against the property.
Which property tax is a priority debt?
Bankruptcy law gives priority to an unsecured property tax that was incurred before the case began and was last payable without penalty after one year before the filing date. In plain terms, that is tax you could still have paid without a penalty at some point in the year before you filed.1
Older property tax, where the last penalty-free payment date was more than one year before filing, falls outside that priority.1
| Part of the tax debt | Chapter 7 | Chapter 13 |
|---|---|---|
| Recent tax inside the priority period2 3 4 | Not discharged | The plan must pay it in full unless the tax authority agrees otherwise |
| Older tax with no lien7 3 | May be discharged as a debt that arose before filing; confirm with a lawyer | Paid with other unsecured debts, which a plan need not pay in full |
| Tax backed by a lien on the property5 3 | The lien remains on the property after the discharge | To keep the property, the plan must pay at least the value of the secured claim |
| Tax that comes due after you file7 8 | Not covered by the discharge | Not covered by the discharge, and a new lien for it is not blocked by the stay |
What happens to property tax in Chapter 7?
A Chapter 7 discharge does not cover a tax of the kind and for the period that the law gives priority, whether or not the tax authority filed a claim in your case. Recent property tax is therefore still owed when the case ends.2 1
Chapter 7 does not involve a repayment plan, so it gives you no built-in way to catch up on back tax over time. If a lien secures the tax, it remains, and the automatic stay that protected the property during the case is not permanent: a creditor can ask the court to lift it.9 5 8
What happens to property tax in Chapter 13?
Chapter 13 is a repayment plan that usually lasts three to five years. The plan must pay priority claims in full, in payments over time, unless the creditor agrees to something else.3 4
For tax backed by a lien, a claim is secured up to the value of the creditor's interest in the property. If you want to keep the property, the plan must give the secured creditor at least that value, and secured debts other than a mortgage on your main home can be spread over the life of the plan.10 3
Filing also triggers the automatic stay, which covers attempts to enforce liens. That can pause a pending tax sale while the plan is set up, but whether a sale that has already taken place can be undone depends on state law and timing, so act quickly and get legal advice.8
What should you check first?
The answer for your property depends on a few dates and records that you can gather before you speak to a lawyer.
- For each unpaid tax bill, the last date it could be paid without a penalty. That date decides whether the bill falls inside the one year priority period.1
- Whether a tax lien has been recorded and whether a tax sale has been scheduled. A lien that is not removed survives the discharge.5
- Whether you want to keep the property. If you do, the practical question is how the lien gets paid, not only whether the debt is discharged.5
Common questions
Will bankruptcy clear my property taxes?
Not by itself. Recent property tax is a priority debt that a Chapter 7 discharge does not cover and a Chapter 13 plan must pay in full. A valid tax lien that is not removed in the case stays on the property.2 3 4 5
What is the one year rule for property tax?
Property tax has priority if it was incurred before the case began and was last payable without penalty after one year before the filing date.1
Sources
Official courts & government references- 11 U.S. Code § 507(a)(8)(B) (Cornell LII)
- 11 U.S. Code § 523(a)(1)(A) (Cornell LII)
- Chapter 13 - Bankruptcy Basics (uscourts.gov)
- 11 U.S. Code § 1322(a)(2) (Cornell LII)
- Discharge in Bankruptcy - Bankruptcy Basics (uscourts.gov)
- Glossary of Legal Terms (uscourts.gov)
- 11 U.S. Code § 727(b) (Cornell LII)
- 11 U.S. Code § 362(b)(18) (Cornell LII)
- Chapter 7 - Bankruptcy Basics (uscourts.gov)
- 11 U.S. Code § 506(a)(1) (Cornell LII)