- Case No. 13-4404
- Purchaser of property tax certificates is entitled to interest at rate shown on tax certificates, not statutory rate for taxes for governmental entity prior to issuance of certificates.
- Procedural context:
- Creditor purchased tax certificates under Ohio law by bidding an interst rate of 0.25% and another certificate at 18%. Bankruptcy court confirmed Chapter 13 Plan that paid certificates at these rates over objection of creditor that statute set interest rate for unpaid taxes at 18%. Bankruptcy Court held that once certificates are purchased, the interest rate stated controlled. On appeal, the BAP affirmed and on further appeal, the Sixth Circuit affirmed.
- Under Ohio law, whe a property owner fails to pay accrued property taxes, the taxing authority sells certificates to investors. Bidding is done by interest rate, with the person bidding the lowest interest rate prevailing in the auction. The successful bidder pays the outstanding taxing amount to the agency and receives a certificate entitling the purchaser to be paid the amount of the taxes plus interest at the certificate rate. Creditor purchased two certificates on debtor's property, bidding 0.25% on one and 18% on the second. Debtor then filed Chapter 13 and proposed to pay the certificate holder the full taxes plus the certificate rates. Creditor objected asserting that Ohio law provided for 18% interest on unpaid taxes. Court concluded that 11 USC Section 511 treated certificates as "tax claims" governed by state law. State law called for interest to accrue at certificate rate until taxes plus accrued interest is paid. Creditor holding certificate with .25% rate entitled to be paid principal amount of certificate plus interest at .25% rate through Chapter 13 Plan.
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