Appeals Court Upholds Interest Rate for Tax Purchaser Claims in Chapter 13 Bankruptcy

A U.S. appeals court upheld the interest rate applied to a tax purchaser’s claim tied to property tax certificate purchases in a Chapter 13 bankruptcy. The Seventh Circuit held that a secured claim from buying a property tax certificate is a “tax claim” under I.R.C. §511(a), meaning the interest rate must follow the applicable nonbankruptcy law. The debtor, a homeowner, did not pay property taxes from 2018 to 2021, prompting a county tax sale and the acquisition of a Certificate of Purchase. One week before the redemption period expired, the homeowner filed for Chapter 13, triggering an automatic stay that blocked the tax purchaser’s next steps. The ruling matters for how bankruptcy courts treat interest on tax-certificate-backed claims.