How should a Tax Collector handle a property in bankruptcy with delinquent taxes?

• A. Continue collection activities without regard to bankruptcy.
• B. Immediately seize the property to recover owed taxes.
• C. Apply only the penalties and ignore principal.
• D. Follow the bankruptcy court's orders and coordinate with the designated authorities; pause collection as required.

Answer: (D)

When a property is in bankruptcy, an automatic stay stops most tax collection actions until the court issues further orders. The Tax Collector must pause all collection activities on delinquent taxes tied to that property and act in accordance with the bankruptcy court’s directions. Coordination with the bankruptcy trustee or debtor in possession and with the designated local tax authorities is essential to determine what collection, if any, may proceed under the bankruptcy plan or court orders. Following the court’s orders and pausing collection as required keeps you compliant with federal bankruptcy law and avoids actions that could undermine the bankruptcy process.