Background
Bernardo Romero owned a home in Cook County, Illinois, but failed to pay property taxes for 2018–2021. Under Illinois law, Cook County held an automatic tax lien and eventually conducted a tax sale. On November 10, 2021, Corona Investments purchased a Certificate of Purchase, which gave it the right to take title to Romero’s property after a redemption period ending October 22, 2024.
One week before the redemption deadline, Romero filed for Chapter 13 bankruptcy protection. The automatic stay halted Corona’s ability to obtain a tax deed, and Corona’s interest became a $26,134.95 secured claim in the bankruptcy proceeding. Under Chapter 13, Romero’s plan had to pay Corona not only the principal amount but also interest to compensate for delayed payment.
The parties agreed that interest was owed but disagreed sharply on the applicable rate. The bankruptcy court held that Corona’s claim was a “tax claim” under 11 U.S.C. § 511(a), requiring application of “applicable nonbankruptcy law.” It set the rate at 18% annually under 35 ILCS 200/21-15, the Illinois delinquent property tax rate. The Seventh Circuit granted interlocutory review to resolve this question.
The Court’s Holding
The Seventh Circuit affirmed. Writing for the majority, Judge Scudder held that Corona’s secured claim qualifies as a “tax claim” within § 511(a) and that § 511(a)’s requirement to apply “applicable nonbankruptcy law” directs courts to the 18% annual delinquent tax rate under Illinois law.
The court reasoned that although Corona is not itself a taxing authority, it acquired through the tax sale an indirect right to receive Romero’s overdue property tax payments. The court’s prior decision in In re LaMont, 740 F.3d 397, established that tax purchasers hold a “claim” in bankruptcy; the majority extended this to conclude they hold a “tax claim” specifically. Crucially, when a tax purchaser acquires a Certificate of Purchase, it “stands in the shoes of the county” and receives what amounts to the county’s equitable remedy for nonpayment. Therefore, the interest rate the county would have received—18% under Illinois law for delinquent taxes—applies to Corona’s claim.
The court rejected two alternatives. First, it declined to use the 12% redemption rate under 35 ILCS 200/21-355, since Romero never redeemed his property. Second, it refused to apply the market-based “Till rate” (named for Till v. SCS Credit Corp., 541 U.S. 465), which bankruptcy courts may adopt when § 511(a) does not apply. The majority reasoned that Congress enacted § 511(a) after and partly in response to Till to simplify interest calculations for tax claims, so importing the Till framework would undermine § 511(a)’s directive to use nonbankruptcy law.
Key Takeaways
- Tax purchasers in Illinois hold “tax claims” under 11 U.S.C. § 511(a) and are entitled to the state’s delinquent tax interest rate (18% in Cook County), not the default bankruptcy market-based Till rate.
- Section 511(a) mandates application of “applicable nonbankruptcy law,” which refers to the substantive interest rates actually prescribed by state law, not bankruptcy court’s gap-filling methods.
- A tax purchaser’s interest in a Certificate of Purchase sufficiently mimics the county’s original tax lien to justify treating the purchaser as standing in the county’s shoes for interest rate purposes.
- The decision narrows the Till approach’s domain and confirms that § 511(a) was enacted to cabin bankruptcy courts’ discretion on tax claim interest rates.
Why It Matters
This decision significantly increases the cost of Chapter 13 relief for homeowners in tax sale situations. The 18% rate is substantially higher than market rates a bankruptcy court would apply under Till, and it applies even though Corona held a secured claim (the property value exceeded the debt). Judge Hamilton’s dissent emphasized that this creates a windfall: Corona gets an above-market rate precisely because it is oversecured, yet the delinquent tax rate bears no relationship to the risks actually posed by Corona (foreclosure is what Corona wants, not what it fears). The decision makes it harder for Chapter 13 debtors to afford plans that address tax purchasers’ claims.
More broadly, the opinion clarifies that § 511(a) directs courts to look for interest rates that actually exist in applicable state law for tax claims, even if those rates seem disconnected from the bankruptcy context or the specific economic realities of a particular creditor’s risk. This may invite future challenges in other jurisdictions whose tax sale laws are similarly ambiguous about interest accrual after redemption periods expire.