The United States Court of Appeals for the Seventh Circuit has made a significant ruling regarding property tax claims in bankruptcy. In the case of Bernardo Romero v. Corona Investments, LLC, the court decided that a tax purchaser's claim qualifies as a "tax claim" under the Bankruptcy Code. This ruling affects homeowners in bankruptcy and tax purchasers in Illinois, clarifying how interest rates on such claims are determined.
The case stems from Romero's failure to pay property taxes on his home in Chicago from 2018 to 2021, leading to a tax sale where Corona Investments acquired a Certificate of Purchase for his property. The court's decision on July 16, 2026, resolves a dispute about the interest rate applicable to Corona's secured claim in Romero's Chapter 13 bankruptcy.
Background
Bernardo Romero owned a home in Cook County, Illinois, where property taxes are assessed annually. When Romero did not pay his taxes, Cook County held a lien on his property. To recoup the owed taxes, the county conducted a tax sale, allowing Corona Investments to purchase the right to collect the overdue taxes.
After Romero filed for Chapter 13 bankruptcy on October 15, 2024, he sought to keep his home while restructuring his debts. The bankruptcy filing triggered an automatic stay, preventing Corona from taking further action to obtain the property. As a result, Corona Investments held a secured claim of $26,134.95 in the bankruptcy case.
The central issue in this case was whether Corona's claim was a "tax claim" under Section 511(a) of the Bankruptcy Code, which would determine the applicable interest rate. The bankruptcy court ruled that Corona's claim was indeed a tax claim, setting the interest rate at 18% based on Illinois law.
The Ruling
The Seventh Circuit, led by Circuit Judge Amy C. Scudder, affirmed the bankruptcy court's decision. The court 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 Corona's claim qualifies as a tax claim under the Bankruptcy Code.
The court emphasized that Section 511(a) requires the interest rate to be determined by applicable nonbankruptcy law, which in this case was found to be 18% under Illinois law. The court noted, "To conclude otherwise would disregard the nature and character of what Corona acquired in the tax sale." This ruling aligns with previous decisions that have addressed similar issues in Illinois bankruptcy cases.
Impact
The ruling has significant implications for both property owners and tax purchasers in Illinois. Homeowners like Romero must now understand that if they enter bankruptcy and have unpaid property taxes, the interest rate on the tax purchaser's claim will be 18%. This could affect their ability to repay debts and retain their homes.
For tax purchasers, the decision clarifies their rights and the interest they can expect on their claims. It reinforces the notion that tax purchasers, like Corona, have a secured claim that is protected under bankruptcy law. This ruling may set a precedent for future cases involving the intersection of property tax sales and bankruptcy law in Illinois.
What's Next
Romero's case cannot be appealed further as the Seventh Circuit's ruling is final. However, it raises questions about how similar cases will be handled in the future. There may be other pending cases in the lower courts that will now reference this ruling as a guiding precedent.