Bankruptcy vs Tax Deferral: Why Some Texas Delinquent Tax Accounts Are Paused
Some accounts on a Texas delinquent tax roll carry a note that collection is paused. On our records cards that shows as Bankruptcy, collection paused, Over-65 or disability deferral, collection paused, or Tax deferral, collection paused. Our records search has a box to leave them out: Hide bankruptcy and deferral accounts.
Bankruptcy and deferral are not the same thing. They come from different laws, apply to different people, and end in different ways. We group them in one filter for one reason: in both cases the county is not moving that account toward a tax suit or a sale right now.
The difference at a glance
| Bankruptcy | Tax deferral | |
|---|---|---|
| What it is | The owner filed a federal bankruptcy case | A Texas homeowner filed a deferral affidavit for their homestead |
| Who | Any owner, any property | Homeowners 65 or older, disabled, or qualifying disabled veterans, on the home they own and live in |
| What it pauses | Collecting taxes owed before the filing and enforcing the lien, unless the court allows it | Tax suits and tax sales on that home while the deferral lasts |
| Do the taxes go away? | No. The bankruptcy case decides how they are handled | No. They stay owed and the lien stays, with 5% yearly interest and no new penalties |
| When it ends | When the case closes or the court lifts the stay | After the owner no longer owns and lives there; the county can sue 181 days after it sends a delinquency notice |
Bankruptcy: the automatic stay
When an owner files for bankruptcy, federal law puts an automatic stay in place. It stops acts to collect debts that arose before the filing, and acts to enforce a lien against property that is part of the bankruptcy estate. For a county, that generally means it cannot push the old delinquent taxes toward a sale while the stay is in effect, unless the bankruptcy court grants relief from it.
For a buyer, that changes two things. The property is not headed to a tax sale on the usual timeline, and buying it straight from the owner is not a simple deal either, because property in a bankruptcy estate is under the case's control.
Tax deferral: protection for certain homeowners
Texas lets a homeowner who is 65 or older, disabled, or a qualifying disabled veteran defer the taxes on the home they own and live in, by filing an affidavit with the appraisal district. While the deferral is in effect, a taxing unit may not file suit to collect the delinquent taxes on that home, and the home may not be sold to foreclose the tax lien.
The taxes are not forgiven. The lien stays on the property and the deferred taxes earn 5% interest a year, but no new penalties. Once the owner no longer owns and occupies the home, the collector can send a delinquency notice, and a suit can be filed starting the 181st day after that notice. A surviving spouse can keep the deferral only in narrow cases (age 55 or older, and the home was both spouses' homestead).
A second, less common deferral protects homeowners whose appraised value jumped: it covers only the part of the value above 105% of the year before, at 8% interest. On our cards that may show as plain Tax deferral.
Why you might leave them off your list
They are not heading to a sale. If you are watching for properties that will reach a tax sale, a paused account is not one of them, sometimes for years.
Mailing them usually wastes money. A wholesaler mailing a thousand letters pays the same postage for every name. Owners in bankruptcy and owners protected by a deferral are among the least likely to sell to you.
It is the decent thing to do. Deferral exists to keep older and disabled Texans in their homes. A letter offering to buy that home looks predatory and can bring complaints. Leaving those accounts out is better for your reputation and for the people on the list.
Tick Hide bankruptcy and deferral accounts on the records search and those accounts drop out of the list and out of any download. Even without the box ticked, we sort them to the end.
One honest limit
We can only flag what the county reports. Many county rolls do not mark bankruptcy or deferral at all, so in those counties the box may not change the count. No flag does not mean the account is clear. Before you rely on an account, confirm its status with the county tax office.
Sources: Texas Tax Code §33.06 (deferral for 65 or older, disabled, or disabled veteran homeowners) and §33.065 (appreciating homestead); U.S. Bankruptcy Code 11 U.S.C. §362 (automatic stay). This is general information, not legal advice.
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