PROPERTY TAX CERTIFICATE CLAIMS
statute for tax certificates. That statute
basically states that the property owner
has to pay the certificate face value
plus the certificate rate of interest on
the certificate purchase price on a
simple interest basis from the time
the certificates are sold until the time
the certificates are redeemed plus
reasonable attorney’s fees and costs.
Thus state law does not give credit, for
interest calculation purposes, for any
principal that is paid down.
What follows are the recent
issues that have been raised, the
recent case law holdings, and an
example of how to calculate the claims
in light of the recent case law. This
recent case law has made it clear
that while the tax value itself cannot
be contested in the bankruptcy, the
amount to be paid on the allowed
secured claims can be modified under
a chapter 13 plan. Further, case law
has held that redemption under state
law is not necessary within the context
of a chapter 13 repayment plan and the
inclusion of pre-calculated post-petition
interest cannot be included in the tax
certificate claims.
Pursuant to 11 U.S.C. §1322, a
debtor can modify a secured claim other
than a claim secured only by a security
interest in real property that is the
debtor’s principal residence. While tax
certificate holders may have a secured
claim, they do not, however, have a
security interest, See In re Lamont,
740 F. 3d 397, 409 (7th Cir. 2014); In re
Slade-Lanier 2014 WL 2565919. The
distinction is that security interests are
created consensually, tax certificates
are not. In re McLemore, 426 B.R. 728
(Bankr. S.D.OH 2010) (citing 11 U.S.C.
§ 101(51); Cortner, 400 B.R. at 611)
Debtors may therefore modify the
rights of tax claims provided they meet
the other requirements for treatment of
secured claims under §1325(a)(5).
The certificate holders argued
that the bankruptcy process could
not alter the state law redemption
process and that the claims had to
be paid pursuant to that redemption
process or the tax liens would not
be released. In Plym