Post-petition debt protection status?

• A. Post-petition debt is protected automatically.
• B. Post-petition debt is not protected. The municipality must seek Order of Relief to pursue debt through tax sale.
• C. Post-petition debt is forgiven.
• D. Post-petition debt is enrolled in a federal program.

Answer: (B)

Post-petition debt protection status hinges on court relief. When a municipality files for Chapter 9 bankruptcy, the automatic stay stops most collection actions, but debts incurred after the petition (post-petition debt) aren’t automatically protected to the point of allowing tax-sale actions without permission. To pursue post-petition debt through a tax sale, the municipality must obtain an Order of Relief from the bankruptcy court. Without that order, post-petition debt isn’t protected for tax-sale collection. It isn’t automatically forgiven, nor is it enrolled in a federal program.