DO’S AND DON’T’S OF AD VALOREM TAXES IN CHAPTER 13
By Sherrel K. Knighton and Melissa Palo Linebarger Goggan Blair & Sampson, LLP 2777 N. Stemmons
Frwy, Suite 1000
Dallas, TX 75207
(214) 880-0089 Telephone
(469) 221-5003 FacsimileSherrel.Knighton@lgbs.com
I. CHAPTER 13 PLANS
1. Don’t schedule ad valorem property taxes as priority unsecured or general unsecured debts unless
no collateral exists.
2. Don’t provide for $0.00 collateral value or a value that equals the scheduled amount of the debt
or the claim amount.
3. Don’t provide for 0% interest.
4. Don’t provide for delinquent ad valorem property taxes to be paid directly.
5. Don’t list the law firm or tax assessor-collector as the creditor. Only list the appraisal
district if it is the entity that collects the taxes, such as Rockwall CAD, Wise CAD, or Parker
1. Do schedule ad valorem property taxes, even current-year taxes. The debtor’s personal liability
for the taxes arises on January 11 and the lien securing payment of that year’s taxes attaches to
the property on that date2. Therefore, the current-year, or year of filing, taxes are a
pre-petition debt and should be included in the debtor’s schedules.
2. Do provide for delinquent taxes to be paid through the plan and current-year taxes (escrowed) to
be paid directly. In the event the debtor decides to surrender his or her interest in the property
to the mortgage company, also surrender the property to the taxing authorities.
3. Do provide for the correct collateral value, which is the full market value of the collateral.
Under Texas law, the ad valorem property taxes are secured by first priority, senior liens, which
means the ad valorem property taxes are senior to the mortgage, the HOA dues, even the IRS taxes
(on real property)3. Therefore, the plan should provide the full market value of the property as
the collateral value for an ad valorem property tax claim.
1 Tex. Prop. Tax Code §32.07. 2 Tex. Prop. Tax Code §32.01. 3 Tex. Prop. Tax Code §32.05.
4. Do provide for the appropriate interest rate – 12.00%4. The only exception to this rate is for
debtors with an active tax deferral on his or her account. For a tax deferral, the appropriate
interest rate is 8.00%5.
5. Do provide for agreed-upon treatment in an amended plan. If you andthetaxing authorities
have agreed to the treatment of the tax claim, be sure to include this treatment in any amended
II. SALE MOTIONS
1. Don’t sell real property free and clear of the current-year ad valorem property tax liens. The
current-year tax liens attach to property on January 1 of the tax year even though the tax bill is
not prepared and mailed until October of the tax year. As a result, the title company is unable to
pay the current-year taxes at closing during the majority of the year. Therefore, the tax liens
should remain attached to the property.
1. Do provide for the current-year ad valorem property tax liens to remain attached to the
property. The liensprovide the taxing authoritiesthe ability toproceedagainstthe property
in the event the buyer fails to timely pay the current-year taxes.
2. Do provide for the liens securing payment of the delinquent ad valorem property taxes to attach
to the sales proceeds and for the delinquent ad valorem property taxes to be paid at closing.
III. HELPFUL TIPS FOR YOUR CLIENTS
A. Make sure your client has applied for all the exemptions for which he or she qualifies:
homestead, over-65, disabled, etc. Exemptions reduce the taxable value for his or her home, thereby
reducing the ad valorem taxes that are assessed on the property.
B. If your client qualifies for a tax deferral, review the pros and cons with him or her and have
your client apply for a deferral if it fits his or her needs. Deferrals allow the taxpayer to defer
payment of the taxes, eliminate any further accrual of penalties, and reduce the interest rate on
delinquent taxes from 12% to 8%. Note that ad valorem property taxes will continue to be assessed
each year. Also, be aware that once the property no longer qualifies for the tax deferral, all
deferred amounts will become due.
C. Recommend that your client review his or her annual proposed property value each spring and file
a written protest if the value is too high. Also, if the debtor has a business, make sure he or she
files the required rendition report with the appraisal district each spring. If the business
closes, make sure your client advises the appraisal district so the account may be inactivated.
D. Advise your client to pay his or her post-petition ad valorem property taxes timely while the
Chapter 13 case is pending to avoid the accrual of penalties and interest.
4 11 U.S.C. §511 and Tex. Prop. Tax Code §33.01(c).
5 Tex. Prop. Tax Code §33.06(d).
IV. APPRAISAL AND TAX COLLECTION CALENDARS
A. APPRAISAL CALENDAR
January 1 Tax assessment date. The ad valorem property tax lien attaches to the property
on this date and the record owner on this date is personally liable for that year's ad valorem
Sec. 23.01, Sec.
32.01, and Sec.
By April 1 Notice of proposed value for properties with a homestead exemption mailed.
April 15 Deadline to file business personal property renditions. Failure to file the
required rendition will result in a 10% penalty added to the ad valorem property taxes.
Sec. 22.23 and Sec. 22.28
By May 1 Notice of proposed value for all other properties mailed.
By May 1 Deadline to file notice of protest of proposed value for properties with a
By June 1 Deadline to file notice of protest of proposed value for all other properties.
July 25 Deadline for chief appraiser to certify the appraisal roll to the tax
B. TAX COLLECTION CALENDAR
October Tax bills are mailed and the taxes are due upon receipt of the bill.
Sec. 31.01 and Sec. 31.02
January 31 Last day to timely pay the taxes billed in October. Sec.
February 1 Penalties and interest begin to accrue on delinquent taxes.
April 1 Delinquent business personal property taxes are turned over to attorney for
collection. Attorney fee penalty accrues.
July 1 Delinquent real property taxes are turned over to attorney for collection.
Attorney fee penalty accrues.