The Seventh Circuit Court of Appeals recently ruled on a significant case involving property tax sales and bankruptcy law. In the case of Bernardo Romero v. Corona Investments, LLC (docket number 25-2021), the court addressed whether a secured claim held by a tax purchaser qualifies as a "tax claim" under the Bankruptcy Code. This decision is crucial for homeowners facing tax liens and bankruptcy, as it determines the interest rate applicable to such claims.
The court's ruling, issued on July 16, 2026, has implications for how property tax sales are handled in bankruptcy cases, particularly in Illinois. The decision affects homeowners like Romero, who filed for Chapter 13 bankruptcy to protect his home from foreclosure by a tax purchaser.
Bernardo Romero is a homeowner in Chicago, Cook County, who failed to pay property taxes from 2018 to 2021. As a result, Cook County placed a lien on his property and later conducted a tax sale. Corona Investments acquired a Certificate of Purchase for Romero's property in November 2021, which allowed them to potentially take ownership after a waiting period. However, before this period ended, Romero filed for Chapter 13 bankruptcy, which triggered an automatic stay preventing Corona from obtaining title to the property.
This case stemmed from a dispute over the interest rate on Corona's secured claim of $26,134.95 in Romero's bankruptcy proceedings. The bankruptcy court determined that Corona held a "tax claim" under the Bankruptcy Code and set the interest rate at 18%, based on Illinois law. Romero contested this, leading to the appeal.
The Seventh Circuit, led by Judge Scudder, affirmed the bankruptcy court's decision. The court ruled that Corona Investments holds a "tax claim" under 11 U.S.C. § 511(a) of the Bankruptcy Code. The judge stated, "We conclude that the acquisition of a Certificate of Purchase situates a tax purchaser like the county as the underlying and originating taxing authority." This means that the interest rate applicable to Corona's claim is determined by nonbankruptcy law, specifically Illinois law.
The court explained that under Illinois law, unpaid property taxes accrue interest at a rate of 18% annually. This rate applies to tax purchasers like Corona, who essentially step into the role of the county in collecting overdue taxes. The court noted that the right to collect overdue taxes and associated interest is akin to the rights held by the county before the tax sale.
In its ruling, the court also addressed the arguments presented by Romero regarding the interest rate. Romero contended that the 18% rate was excessively high and did not reflect the economic realities of his situation. However, the court maintained that the law clearly supports the application of this rate to tax claims, reinforcing the precedent set in previous cases.
The impact of this ruling extends beyond this specific case. It clarifies how interest rates on tax claims will be handled in future bankruptcy cases involving property tax sales. Homeowners facing similar situations will now have a clearer understanding of the potential financial implications of their tax delinquencies and bankruptcy filings.
This ruling also sets a precedent for how tax claims are treated in bankruptcy proceedings, particularly in Illinois. It reinforces the idea that tax purchasers hold significant rights in these situations, which can affect the outcomes for debtors seeking to retain their properties through bankruptcy.
Looking ahead, it is unclear whether this ruling can be appealed further. The court did not indicate any pending related cases, but the decision may prompt discussions about potential legislative changes regarding property tax sales and bankruptcy law. The ruling serves as a reminder of the complexities at the intersection of property tax laws and bankruptcy proceedings, particularly in states like Illinois.