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4. Property Taxes


4.1. Types of Property Tax. A property tax is a tax imposed by virtue of a person’s ownership of property. There are two common forms of property taxes:       Index

(a) real estate taxes levied against land owners by local municipalities; and

(b) personal property taxes (sometimes called "ad valorem" taxes) levied against business owners for personal property used in connection with a business.

4.2. Dischargeability of Property Taxes. A person’s liability for any property tax is not dischargeable in a Chapter 7 case unless the tax was last payable without penalty more than one year before he files for bankruptcy. In other words, all property taxes more than 1 year old on the bankruptcy filing date are dis­charge­able.        Index

In Chapter 13 cases, the bankruptcy plan must offer to pay 100 percent of all property taxes (including all accrued interest and penalties) last payable within one year before the case is filed. The bankruptcy plan could legally pay nothing on older property taxes.

4.3. Two Year Filing Rule Not Applicable. In Texas, the 2 year filing rule does not apply to property taxes because the taxpayer is not legally required to file a tax return. The taxing authority will assess a property value and the tax amount without receiving any return from the taxpayer.        Index