J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Many of my Houston area bankruptcy clients are also in trouble with their property or "ad valorem" taxes. Property taxes in Texas are billed "in arrears" so the taxes that are due by January 31, 2009, are for tax year 2008. If you don't timely pay your property taxes in Texas, you are hit with a big penalty. Regular penalty charges may be as high as 12 percent, depending on how long the tax remains unpaid. Interest is charged at the rate of 1 percent per month, and interest continues to accrue as long as the tax remains delinquent.

There may also be an additional 15 percent penalty added if the taxing unit hires a private attorney to collect the delinquent taxes. If you still don't pay, the tax authorities will eventually file a lawsuit against you, and if that doesn't get them paid, they will foreclose on your property for not paying your property taxes. Do yourself a favor and pay your property taxes on time. If you don't, you may be able to make a "payment plan" with the tax authorities, but they usually want a sizable down payment, usually 1/3 down followed by monthly payments. If you have a mortgage on the property, and your mortgage company learns about the property tax delinquency, they will usually pay the taxes, as the tax authority can foreclose on your mortgage company too! If your mortgage company pays your taxes (when you previously did not have an escrow account) they will want to be repaid, usually over a 6-12 month period, and they will also usually start an escrow account for you and start collecting money for taxes for the following year.

This can make your house payment go up a great deal, to where you can no longer afford to pay it. This is when people often come in to see me, when they are in trouble with their mortgage company for delinquent payments and/or delinquent property taxes. At that point it may be possible to file a Chapter 13 bankruptcy for you, to pay the delinquent payments and taxes back over a period of time, up to 60 months. Here in the Houston area, the Chapter 13 Trustees will also pay your regular monthly mortgage payments, from money that you pay them.

I recommend that you do NOT borrow money to pay delinquent property taxes from companies that send you ads in the mail. They charge very high interest. If you find yourself behind on property taxes, and no other savings or other options to pay them, it may be better to just call your mortgage company and ask them to pay them, and set up an escrow account for you. You can contact the tax authorities to get on a payment plan, but according to the documents that you signed with the mortgage company to buy the house, you are supposed to stay current on property taxes.

By the way, don't pay more property taxes than you have to. I always recommend that you protest your tax valuation, every year. Over time, it helps to hold your taxes down. Don't have time to do it yourself? There are services that will do it for you, and they only charge you a percentage of what they save you (if they are able to save you anything). The one that I use is O'Connor & Associates here in Houston, and their webs site is http://www.cutmytaxes.com. Any questions or comments on any of this?

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