Exemption of Real Property Tax Liens from Federal Bankruptcy Automatic Stay

Counties, cities, schools and special districts rely heavily on real property taxes as a primary source of revenue. The ability of these governments to collect properly assessed and levied real property taxes is restrained by the federal bankruptcy automatic stay. Some federal courts have ruled that real property tax liens retain their secured status in bankruptcy while other federal courts have ruled that real property tax liens are stayed. This conflict among federal courts results in the bankruptcy laws being applied differently in different parts of the country. These federal court conflicts result in substantial loss of significant amounts of real property tax revenues.

As a result, the Government Finance Officers Association requests Congress to amend Section 362(b) of the United States Bankruptcy Code, 11 U.S.C., to exempt any act to create, perfect, or enforce any real property tax lien that arose after the commencement of a bankruptcy proceeding.

• Publication date: May 1993