In a recent Chapter 13 bankruptcy case in Texas, the bankruptcy court ruled that a third-party lender claim can be treated as a tax claim. The bankruptcy court also ruled that the interest rate due on that tax claim could not be modified in Chapter 13 bankruptcy.
It is now clear that when a federal, state, or local governmental entity pursues a claim against a bankrupt for unpaid taxes, the applicable interest rate is determined in accord with non-bankruptcy law...Under Texas law authorizing a third party's payment of taxes, "[a] tax lien may be transferred to the person who pays the taxes on behalf of the property owner[.]" Upon an authorized transferee's payment of the property owner's taxes, the tax collector certifies that the taxing unit's tax lien is transferred to that transferee.The transferee of the tax lien is then "subrogated to and is entitled to exercise any right or remedy possessed by the transferring taxing unit, including or related to foreclosure or judicial sale[.]"
The bankruptcy court in this case ruled that not only does the third-party lender have the right to get the tax claim's interest rate; but it also has the right of a tax claim status. This could mean that a debtor who pays their taxes with a credit card could technically have at least that portion of their credit card debt treated as a tax claim which would likely make it nondischargeable in bankruptcy. Debtor's who have third-party lenders who have paid for their tax debts should consult with their bankruptcy attorney to find out the best strategy for minimizing their liability.