Tax Ease Funding, L.P. v. Thompson (In re Kizzee-Jordan)

Summarized by Gregory Hesse , Hunton Andrews Kurth LLP
15 years 3 months ago

Citation:

(5th Circuit, Dec 31,1969)

Tag(s):

5th Circuit

Ruling:

The issue before the court was whether a third-party lender who pays a debtor's ad valorem taxes and receives a transfer of the local taxing authority's tax lien under Texas law holds a tax claim protected from modification by 11 U.S.C. Sec. 511. The court concluded that the third-party lender's claim is a tax claim, and that the interest rate may not be modified by a debtor's Chapter 13 Plan.

Procedural context:

Appeal from an order overruling an objection to confirmation of a Chapter 13 plan.

Facts:

The Debtors owed ad valorem property taxes on their home for the 2006 and 2007 tax years. In February, 2008, the Debtors' borrowed funds from Tax Ease Funding, L.P. and, pursuant to Tex. Tax. Code Sec. 32.06(a-1), authorized Tax Ease to pay the taxes on their behalf. The Debtors executed a promissory note agreeing to repay the debt over a ten year period with an annual interest rate of 14%. In return for providing the funds, Tax Ease received a transfer of the taxing authorities' tax liens against the Debtors' property. In April, 2009, the Debtors filed a voluntary petition under Chapter 13. The Chapter 13 Plan proposed repaying the debt to Tax Ease at a reduced annual rate of 5%. Tax Ease objected to confirmation of the plan on the ground that under Sec. 511 of the Bankruptcy Code, its claim for repayment was a tax claim for which the interest rate must be determined by nonbankruptcy law and may not be modified by the bankruptcy court. The United States Bankruptcy Court for the Southern District of Texas overruled Tax Ease' objection to the Debtors' Chapter 13 Plan. On appeal, the United States Bankruptcy Court for the Southern District of Texas reversed. On further appeal, the Fifth Circuit Court of Appeals affirmed the District Court's decision.

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!