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News & Press: Sacramento Report

Legislation Seeks to Stop Automatic Bankruptcy Stay in Tax Sales

Tuesday, June 19, 2018  
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Assembly Bill 2746 (Garcia) seeks to prevent the automatic bankruptcy stay from stopping a tax sale once the right of redemption expires. Often taxpayers file bankruptcy to remain in the property for as long as possible. The new wrinkle created by AB 2746 is that if the taxpayer files bankruptcy the county can proceed to sell the property and claim the taxpayer had no interest in the property subject to the Bankruptcy Court's automatic stay because the taxpayer was divested of legal and equitable title upon the redemption termination deadline even if the sale has not concluded.

If AB 2746 is enacted, counties holding tax sales can claim that the Bankruptcy Court stay is ineffective as to the tax-sale because the taxpayer/bankruptee no longer has a legal or equitable interest in the property if they did not redeem the property prior to the redemption termination deadline. This express "loss of rights" provision addresses a bankruptcy-related court decision that has created uncertainty over the tax sale process where a property owner files bankruptcy in the window period after the tax sale commences but before the auction concludes. The issue giving rise to this bill relates to public auction tax sales spanning multiple days and that involve Internet sales. To deal with internet sales more explicitly, the bill was amended to provide that the commencement of the tax sale constitutes the actual sale date regardless of the auction conclusion.

California Land Title Association

1215 K Street #1816 Sacramento, CA 95814-3905
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