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What Is Real Estate Tax Sales Redemption?

Robert J. Adams and Associates July 22, 2020

When property owners, including homeowners, do not pay real estate taxes, the county can “sell” the taxes to a “tax buyer.”

Man handing someone a small house over real estate documents

Here’s How It Works:

If the taxes are delinquent for more than one (1) year, then the county will sell the taxes. A tax buyer pays the county the amount of the delinquent taxes. The property owner is given a period of time to redeem, which is two and a half years for homeowners and two years for other property owners. The property owners will receive a certificate that gives the date of the redemption and the estimated amount that has to be paid to redeem. There will be new estimates of redemption every six (6) months.

When the redemption expires without payment, the tax buyer can file a petition to claim the deed. If successful, the tax buyer will become the owner of the property, free and clear of liens. As the expiration of the redemption approaches, the amounts to be paid become very high. During the period of redemption, there will be new tax payments and high interest rates; this creates a snowball effect which makes it extremely difficult for the property owner to redeem the property.

Real-world example: A homeowner’s taxes were sold for less than $700, and at the time of the redemption, the amount had jumped to over $7,000!

There Is A Way To Save Your Home!

A Chapter 13 bankruptcy will allow you to pay the redemption amount in monthly installments over the course of five years, rather than all at once through a lump sum payment. The right to file for Chapter 13 bankruptcy to pay redemption amounts was not always settled law, but now it is!

The 7th Circuit Court of Appeals is essentially the governing court for Northern Illinois, and in a case recently handed down, they affirmed homeowners’ right to file Chapter 13 bankruptcies to save their homes. After you file for Chapter 13 bankruptcy, you will still have the option of selling your property or obtaining a mortgage. If you are in danger of losing your home, consider filing for Chapter 13 bankruptcy.