A bankruptcy court in Syracuse ruled that, in chapter 13, the interest rate owed to a private purchaser of a property tax lien is the same as the government interest rate. In re Meyhoefer, Bankruptcy Court Northern District of New York chapter 13 #10-33272; Hon. Margaret Cangilos-Ruiz decision June 27, 2011.In chapter 13, secured claims being paid through the plan normally receive a "till" rate of interest on that claim, named after the U.S. Supreme Court decision Till v. SCS Credit Corp., 541 U.S. 465 (2004). Locally, the current "Till" interest rate is 5.25%. But Bankruptcy Code Section 511(a) requires payment of the statutory interest rate when paying tax claims. In most counties in New York, property taxes accrue 12% interest until paid. Monroe County (Rochester) and Erie County (Buffalo) charge 18% interest on unpaid property taxes.In this case, Onondaga County's property tax lien was sold off to a private entity, American Tax Funding LLC. The debtor filed a chapter 13 to cure their property tax default to this private creditor, and the creditor wanted to be paid Onondaga County's 12% interest rate, rather than a much-lower "Till" interest rate.In a detailed opinion, the court concluded that this lien was still a tax claim, as that term is used in Section 511(a), and that the creditor was entitled to the statutory interest rate.Stopping a tax foreclosure through a chapter 13 bankruptcy action is a complicated and delicate situation, as this case shows. If you are in a tax foreclosure and wish to see if a bankruptcy can stop the process and allow you to cure the default, please see the chapter 13 page of my web site. You may also contact me for a phone consultation of your situation, at no charge.
Following Western District of New York precedent, a bankruptcy judge in the Northern District of New York concluded that, in a New York tax foreclosure, title to real estate does not transfer from the property owner to the taxing authority (here, a village) until the entry of a court order approving the transfer. In this unusual case, it was the debtor, not the village, arguing that the transfer took place earlier, when the redemption period ran. Onteora Associates v. Village of Fleismann, Northern District of New York Chapter 11 #09-63106; Adversary Proceeding #09-80076 (Judge Davis; decision August 11, 2011; on appeal). The property in question in the Onteora case is a movie theater, two stores and an apartment, valued on the bankruptcy schedules at $331,717, and subject to $31,820 in property taxes and a mortgage of $62,400. There would appear to be substantial equity in the property. The village filed a tax foreclosure petition December 11, 2008. Under New York tax foreclosure law, a property owner has a limited time period - three months - to redeem the property by paying off the back taxes. In this case, the redemption deadline was May 5, 2009. The taxes were not paid by then, and the village filed for a default judgment transferring title on September 25, 2009. The property owner and the mortgage bank both opposed the application; the court disallowed the debtor's objection, but agreed with the bank and, on December 14, 2009, denied entry of a default judgment transferring title.
The one thing everyone knows about bankruptcy is that student loans are not discharged. Prior to 2005, non-dischargeable student loans were loans guaranteed by the government or provided by not-for-profit educational institutions. But as part of the changes made to the bankruptcy code in 2005 (known as "BAPCPA"), private student loans were included in this non-dischargeability definition.
A debtor cannot be compelled to turn over tax refunds she no longer has, in a Buffalo case where the debtor originally filed Chapter 13, spent the refunds, and then converted to Chapter 7. In re Schick Bankruptcy WDNY (Buffalo) #09-15602 (Judge Bucki; decision July 26, 2011.)
Courts are divided as to whether Chapter 13 cases converted to Chapter 7 are subjected to the Chapter 7 'means test' of Bankruptcy Code Section 707(b). However, a Buffalo bankruptcy judge has determined that a case originally filed in Chapter 7, then converted to chapter 13 to avoid an abuse dismissal, then reconverted to chapter 7 due to a change in circumstances, will be considered abusive based on the circumstances at the time of the original filing. In re Karlstrom; Bankruptcy WDNY (Buffalo) #09-12267 (Judge Bucki; decision August 18, 2011).