Lawsuits pile up as Illinois lags on reforming tax sale laws
[September 12, 2025]
By SIDNEE KING PINEDA | Illinois Answers Project
A little-known practice that lets private investors extract millions in
equity from Illinois homeowners is under mounting legal fire after the
U.S. Supreme Court ruled it unconstitutional, leaving some counties
potentially on the hook for millions of dollars in damages.
For decades, county treasurers in Illinois have collected unpaid
property tax bills by selling the debt to private investors. If
homeowners behind on their taxes fail to repay the debt plus interest,
those investors can get the deed to their homes. In those cases, the
homeowners lose the entire value of their residences, even though they
often owe only a fraction of that amount.
In 2023, the Supreme Court ruled that such actions are unconstitutional.
A Minnesota homeowner argued that Hennepin County violated her Fifth
Amendment rights by taking her home and pocketing more than the $15,000
she owed in back taxes. Following the ruling, states rushed to reform
their laws to avoid legal fallout.
All except Illinois, where serious efforts continue to flounder in the
statehouse as competing special interests clash over the best route to
reform.
The price tag to homeowners losing their property is high.
California-based researchers tracking tax sale practices nationwide
determined that investors in Illinois took in $148 million more than
they were initially owed when they bought unpaid taxes, from 2014 to
2021.
Cook County Treasurer Maria Pappas is facing three lawsuits in federal
court over the issue, including in a class-action lawsuit, in which
attorneys argue there are 1,700 homeowners who improperly lost their
home equity through tax sales.
Last fall, a federal judge allowed to move forward a lawsuit by suburban
homeowners against officials in eight Illinois counties, citing a loss
of millions of dollars in home equity in tax sale seizures.
This spring, many of those same officials sued the state of Illinois
which, they say, left them vulnerable to litigation because they haven’t
reformed the law.
Amid the flurry of the lawsuits, tax attorneys held meetings at the
Chicago Bar Association to discuss the potential upending of their
industry. They worried that the window to limit the legal and financial
fallout was rapidly closing. Or that it had already slammed shut.
“I think we’re out of time,” said meeting leader and longtime tax deed
lawyer, Terry Carter, who represents both homeowners and investors.
There is little remedy for homeowners when they lose their homes as part
of the tax sale. They can sue the county treasurer and try to show they
weren’t at fault. But even when homeowners succeeded in court, it did
them no immediate good. In 2022, Illinois Answers found that hundreds of
families who won compensation through Cook County’s indemnity fund had
waited an average of seven years for their checks. The fund was
insolvent.
Since then, little has changed, according to records from the Cook
County treasurer’s office. In fact, the wait time to get paid is even
slightly worse.
Pappas has acknowledged that the process is slow and harms families with
few assets beyond their home equity, but the fund still owes more than
$33 million to homeowners. More than 270 households are in limbo,
waiting an average of four months longer for judgement payouts than in
2022, when Illinois Answers first reported on the fund’s insolvency.
What has changed is the mounting legal pressure on Pappas and other
treasurers to get their tax sale processes changed, given the Supreme
Court decision
“We were hopeful states would act quickly,” said Christina Martin, the
attorney who successfully argued the Supreme Court case. “But many,
including Illinois, have resisted meaningful reform.”
Springfield lawmakers have failed to act in the most recent legislative
session, as interest groups vied with competing proposals.
Pappas and a group of housing advocates, suggest overhauling the state’s
tax sale system entirely, creating an auction where properties are sold,
not just delinquent tax bills. Another camp, led by attorneys
representing homeowners, recommend creating a state equity fund rather
than relying on counties to pay homeowners through indemnity judgments.
And tax buyers, whose influential lobbyists had beat back reform efforts
for decades, are failing to find legislative support in Springfield.
Meanwhile, a coalition of longtime tax buyers sued Pappas and other
treasurers, claiming the tax certificates they had purchased were now
all but worthless in the eyes of the law.
“This is a crisis, and something needs to be done,” said Rep. Will
Guzzardi, who sponsored a reform bill. “We weren’t able to come to
consensus by the end of session on what that something should be.”
At the last minute, legislators did manage to pass a bill delaying the
county’s fall tax sale until next March. In a statement, Pappas said she
advocated for the delay to give lawmakers more time to craft a solution.
But attorneys argue that the delay won’t stop the lawsuits already in
motion.
“No matter what reforms come now, they won’t undo the harm already
done,” said Lawrence Wood, one of the attorneys representing plaintiffs
suing Pappas over the tax sale process.
“The treasurer has dropped the ball…”
Frank Moore owns two homes side by side on a quiet block in Grand
Crossing. He’s lived there for 30 years and says he’s always found a way
to stay current on his property taxes — at least until 2021.
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Cook County Treasurer Maria Pappas (Illinois Answers file photo)
That year, Moore says the county clerk’s office mixed up tax bills
between the two homes. When he went to the county building to pay off
the tax debt he owed for the home he lived in, he says, a county
employee mistakenly told him he had more time. They were wrong, that
information applied to his property next door.
It wasn’t until the fall when he learned his taxes were put up for
auction, and an investor purchased the debt. Ultimately, the property
was deeded to a financial group in Naperville.
In February, a county judge ruled that Moore was entitled to the equity
in his home. But on the advice of his attorney, Terry Carter, Moore sold
his judgment to Red Pine Properties — the same company that had bought
his tax debt.
To avoid a seven-year wait for indemnity and to stay in his home, Moore
agreed to let Red Pine keep $132,000 of the court-ordered judgment. He
could pocket the rest. Moore hired an independent appraiser who valued
the home at $208,000, but, Moore says, the judge used county assessor
data to set a lower number.
Moore walked away with a little more than $22,000, from which he still
needed to pay his legal fees. “I was left optionless,” said Moore, who
took the deal to stay in his home. “This is just outright bullying.”
Illinois homeowners have long been required to sue the county to receive
indemnity. The process is opaque and legally complex, and the burden of
proof rests with the homeowner to show they were not negligent.
Since successful claimants can wait years to see any money, many choose
to assign their judgments away to stay in their homes. The financial
groups wait the average seven years for the county to pay out judgments
and homeowners sign a lease-to-buy deal until the check clears.
Attorney Martin Salzman, who has handled dozens of indemnity cases, said
that 10 years ago, when the county paid judgments out more quickly,
almost none of his clients would sell their equity rights. Today, he
says, more are accepting lowball settlements.
The indemnity fund can’t keep pace with the payouts now because it’s
funded by fees tax buyers pay at sale. Right now those fees aren’t high
enough.
Salzman said that Pappas’ failure to create a solution for indemnity
fund insolvency is to blame for the sprouting of this new industry. “The
treasurer has dropped the ball and completely ruined the system,” he
said, noting that even his legal fees suffer under these arrangements.
In response, Pappas wrote in a statement that her office has been trying
to reform state tax sale laws for years. But, she says, those efforts
have been “thwarted by tax buyers and their lobbyists” who prioritize
profits
According to data from the treasurer’s office, of the 287 indemnity
payments made since 2016, more than 80% were paid to someone other than
the homeowners who filed the petitions.
The county treasurer and County Board President Toni Preckwinkle backed
a bill that would create a “tax deed state.” Under that system, if a
homeowner misses their redemption window, their property and all accrued
tax penalties are auctioned to the highest bidder. If the home is
eventually sold, any surplus would go directly to the homeowner.
A lobbyist representing tax buyers, who asked not to be named to speak
candidly about the legislative process, said that since the Supreme
Court ruling disrupted the industry’s business model, tax buyers have
struggled to find legislative support or a viable alternative path
forward. Tax buyers have typically argued that they perform an important
function that ensures governments get their tax revenue, even when
homeowners don’t pay their property taxes.
Tax attorney Mindy Salyer has proposed a competing plan to establish a
state equity fund that would be financed by raising fees paid by all tax
buyers, including the Cook County Land Bank, guaranteeing that
homeowners receive any surplus without having to sue.
But critics argue the proposal could replicate the very problems it aims
to fix, warning that fees collected from tax buyers at auction are too
low to fund a meaningful surplus equity program.
“I don’t want us to go down the path of re-creating the same failures of
the current system,” said Guzzardi, who sponsored the auction bill.
All three groups say they’re working to revise their proposals ahead of
the fall veto session, but it remains uncertain whether a bill will pass
before the tax sale resumes in March.
Guzzardi argued that the onus is on the tax buyers — whose main goal is
to preserve a model that would allow them to continue buying tax
debt,with low administrative fees at sale and high interest rates over
time — to come to the table in good faith.
“Everyone recognizes that the system is unconstitutional,” Guzzardi
said. “I really believe the momentum is in favor of reform.”
This article first
appeared on Illinois
Answers Project and is republished here under a Creative
Commons Attribution-NoDerivatives 4.0 International License. 
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