For homeowners in Pennsylvania facing the risk of real estate tax sale proceedings, filing for bankruptcy can provide critical relief. The automatic stay, a powerful legal provision under the U.S. Bankruptcy Code, offers homeowners protection by immediately halting real estate tax sale proceedings. This article explores the impact of the automatic stay in Pennsylvania, emphasizing how it grants homeowners more time to either sell their property for its fair market value or repay real estate tax arrears within a 60-month term through bankruptcy.
Understanding the Automatic Stay:
The automatic stay is a fundamental component of bankruptcy law, specifically outlined in Section 362 of the U.S. Bankruptcy Code. When an individual files for bankruptcy, whether Chapter 7 or Chapter 13, the automatic stay is automatically triggered. It serves as a legal injunction that prevents creditors, including taxing authorities, from pursuing collection actions, such as real estate tax sale proceedings.
Halting Real Estate Tax Sale Proceedings:
In Pennsylvania, the automatic stay plays a crucial role in stopping various types of real estate tax sale proceedings, including the tax upset sale and the judicial sale:
1. Tax Upset Sale: The automatic stay immediately halts the tax upset sale process in Pennsylvania. This type of sale occurs when a homeowner fails to pay real estate taxes for a period of two years. The stay prevents the taxing authority from proceeding with the sale and provides homeowners with valuable time to address their real estate tax arrears.
2. Judicial Sale: The judicial tax sale (also known as the “free and clear” sale) occurs after a property has been exposed to a tax upset sale and does not sell. The automatic stay also stops the judicial sale, which is a court-ordered sale of a property to satisfy delinquent taxes. Homeowners filing for bankruptcy can benefit from the automatic stay, as it temporarily halts the judicial sale process, providing them with additional time to address their tax arrears.
Extended Time for Resolution:
The automatic stay offers homeowners facing real estate tax sale proceedings in Pennsylvania the opportunity to resolve their tax arrears in the following ways:
1. Sell the Property at Fair Market Value: The automatic stay grants homeowners an extended period to market and sell their property at fair market value. By doing so, they can generate sufficient funds to repay their real estate tax arrears in full, potentially avoiding the sale altogether. By selling the property on the open market, you can avoid giving away your house to real estate “investors” or flippers who may not have your best interest in mind. For further discussion of why selling real estate to a flipper/investor is a bad idea, click here: (link)
2. Repay Real Estate Tax Arrears in Chapter 13 Bankruptcy: Homeowners struggling with real estate tax arrears can file for Chapter 13 bankruptcy, which allows them to propose a repayment plan within a 60-month term. The automatic stay halts real estate tax sale proceedings, providing homeowners with an opportunity to catch up on their tax arrears through regular payments alongside their other financial obligations.
3. Negotiate Repayment Arrangements: The automatic stay gives homeowners the chance to negotiate repayment arrangements with the taxing authority. This may involve establishing a payment plan or exploring other options to gradually satisfy the delinquent tax debt.
Seeking Legal Representation:
Navigating bankruptcy, especially in the context of real estate tax sale proceedings, requires experienced legal representation. Homeowners should consult with a knowledgeable bankruptcy attorney to understand the intricacies of bankruptcy law, explore available options, and develop a strategy tailored to their specific circumstances.
Filing for bankruptcy in Pennsylvania triggers the automatic stay, a powerful provision that immediately halts real estate tax sale proceedings. The automatic stay grants homeowners additional time to either sell their property at fair market value or repay their real estate tax arrears within a 60-month term through Chapter 13 bankruptcy. Seeking the guidance of a skilled bankruptcy attorney is crucial to navigate the bankruptcy process effectively, protect homeowners’ rights, and make informed decisions that can lead to financial stability and the avoidance of real estate tax sale proceedings.
Brent C. Diefenderfer
Shareholder | Attorney
Brent C. Diefenderfer is a bankruptcy attorney representing clients throughout central Pennsylvania including York, Lancaster, Harrisburg and Gettysburg. Brent is certified as a Consumer Bankruptcy Specialist by the American Board of Certification and is one of only 25 attorneys in Pennsylvania to hold this designation.
Brent advises clients on implementing debt reduction strategies that are appropriate to their unique situation, including bankruptcy under Chapter 7, Chapter 13 or Chapter 11, creditor’s rights and non-bankruptcy debt reduction strategies.
Read Brent’s Bio Page in full HERE.