December 15, 2019

Chapter 13 and County Property Taxes

I recently worked on a case that demonstrated the need for Chapter 13 attorneys to remain alert when dealing with county property taxes and Chapter 13 debtors.

In this case, my client was both delinquent in his payment of county property taxes and his taxes were not being escrowed by the mortgage company.  Because of the delinquency, I included the county tax commissioner as a creditor in the case.  Because my client’s county property taxes were not being escrowed, I allocated approximately $300 per month as a monthly tax escrow so that he would be able to pay the tax bill later this year.

The county tax commissioner filed a proof of claim that included the delinquent tax debt for 2005 as well as anticipated property tax debt for 2006.  I filed a Motion to Disallow Claim on the grounds that the 2006 tax debt had not yet come due and because we were already allocating for this tax obligation in the budget.

The county attorney called me and explained that under Georgia law, your county property tax debt comes due on January 1 in the exact amount of the previous year’s tax.  This tax obligation is subject to change based on updated tax rolls but it exists as of January 1.  So, in my case, his position is that the county acted correctly in filing a proof of claim for both 2005 and 2006.

I discussed this issue with my client and we decided to withdraw our objection to the county’s proof of claim, and we will amend our budget to get rid of the 2006 monthly allocation.  On January 1, 2007, however, I will need to re-amend the budget to add a monthly tax escrow allocation as he will have to pay 2007 directly.

Interestingly, this issue would not have arisen if there had been no delinquency for 2005 as I would not have listed the county as a creditor, although arguably every property owner is automatically delinquent as of January 1.  My sense is that the mortgage company escrow departments as well as county tax commissioner’s offices are probably fine with the existing escrow system as it would be a logistical nightmare to convince escrow departments not to escrow for the current calendar year.  However, if you pay your property taxes directly or if you do list the county tax commissioner as a creditor be aware of this proof of claim issue so that you do not double pay.

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