The Texas Homeowner’s Manual: Protecting Your Equity from Tax Foreclosure

1. How Texas Property Taxes Work: The “Super-Lien” Priority

Every year on January 1st, a tax lien automatically attaches to every property in Texas by law. This is not a voluntary agreement; it is a statutory claim that takes priority over almost all other interests.

The “Super-Priority” Concept (§32.01)

In the legal “line” of creditors, property taxes are at the front. This is known as a “Super-Priority Lien.” Even if you have a mortgage with a major bank, the county’s tax lien stands ahead of the bank’s interest.

The Mortgage and Escrow Risk

Because the tax lien is superior, a tax foreclosure can extinguish (wipe out) your mortgage. To protect themselves, banks often pay delinquent taxes from your escrow account. If you don’t have enough funds, they may “accelerate” your loan, demanding full payment or starting a separate bank foreclosure.

Personal Liability (§32.07)

Ownership on January 1st makes you personally liable for that year’s taxes. This means the county can theoretically pursue your other assets or bank accounts to satisfy the debt, even if the property is sold later in the year.

2. The Delinquency Timeline: The Equity “Snowball”

Tax bills are typically mailed in October and are officially due by January 31st. On February 1st, a mandatory penalty schedule begins.

3. Emergency Options: How to Stop the Auction

If your property is posted for a “First Tuesday” auction, you must act before the gavel falls. Here are the primary legal levers available.

Bankruptcy and the Automatic Stay (§362)

Filing for Chapter 13 Bankruptcy is the most common emergency tactic. It triggers an “Automatic Stay,” which legally prohibits the county from proceeding with the sale—even if it is scheduled for the next day. This allows you to repay the tax debt over a 3-to-5-year period under court protection. Warning: Bankruptcy is a severe hit to your credit that stays on your record for up to 10 years.

Tax Deferrals for Seniors and Disabled (§33.06)

If you are age 65 or older or disabled, you can file a Tax Deferral Affidavit. This “freezes” the collection process. As long as you live in the home, the county cannot foreclose. However, the debt grows at a 5% annual rate and must be settled eventually.

Payment Plans (§33.02)

Homestead owners have the right to request an installment agreement for at least 12 months. While this stops the auction, 12% annual interest still accrues, and one missed payment defaults the plan.

4. Private Tax Lenders: Pros and Cons

Private companies can pay your taxes for you in exchange for a new lien on your home.

• Pros: They stop the county’s penalties and attorney fees immediately. They often offer more flexible monthly payments than the government.
• Cons: They take over the “Super-Priority” position. Their interest rates are high (up to 18%), and they have the same power to foreclose on you if you miss a payment.

5. The Auction: Credit Impact and Redemption

Credit Score Destruction

A property tax foreclosure judgment is a public record. It can drop your credit score by 100+ points and remain on your record for 7 years. This makes it incredibly difficult to rent a house, qualify for future loans, or even pass some employment background checks.

Right of Redemption (§34.21)

Homestead owners have 2 years to buy the property back from the auction winner. However, you must pay the auction price plus a 25% penalty (Year 1) or a 50% penalty (Year 2).

6. The Strategic Choice: Keeping vs. Selling

Protect Your Future and Your Equity

Don’t let the county take your home for a fraction of its value. Clear your debt and move forward with cash in hand.