When more than 20,000 pieces of land in Lake County were listed for the October 2006 tax sale, it was not by random chance that so much property was tax delinquent.

It was the first such treasurer's tax sale since then-Treasurer Peggy Katona halted all Lake County tax sales in the wake of the 2004 statewide reassessment of property values.

Many elected officials furiously declared the unfairness of the reassessment, which pushed assessed values -- and thus tax bills -- skyward for older homes in urban areas of northern Lake County.

This was the back drop for a time in which at least 67 tax delinquent property owners were improperly given protection from their parcels being sold at tax sale, a Times investigation found. Those property owners' parcels were removed from the tax sale under protection of bankruptcy -- even though federal court records show no valid bankruptcies existed for those owners at the time.

More than three years passed without annual tax sales prior to the 2006 sale, essentially allowing a tax holiday for many people who could not or did not want to pay their new bills, county records show.

When the list for the October 2006 sale was certified, it included more than 22,000 pieces of tax delinquent land -- a record number at the time.

Officials immediately began whittling down the list. The results of the last-minute scramble were recorded in a 2-inch-thick stack of handwritten forms still on file in the county's tax sale office, which The Times relied upon for its analysis of bankruptcy records.

The list shows that most of the properties were removed because the owners agreed to pay some or all of the overdue taxes up front. But The Times found that many of the people whose homes were removed for bankruptcies never declared bankruptcy.

John Petalas, who became treasurer just months before the 2006 tax sale, said his office launched a major effort after the sale to purge many the log of 13,000 properties listed in computer records as protected by bankruptcies.

It was a continuation of an effort first launched by Katona that has brought the total number of bankruptcies in the system to 2,500, Petalas said.

"(Katona) instructed staff to bring the bankruptcy files up to date, and then she left office and I inherited the situation," Petalas wrote in a letter to The Times.

A timeline of tax sales

September 1993 Taxpayers from St. John file lawsuit challenging property tax system. State Supreme Court in 1998 issues ruling that results in a statewide reassessment.

January 2002 Reassessment begins, with tax bills to rise steeply for property owners in northern Lake County. Tax bills for 2002 don't go out until summer 2004.

March 2003 A scheduled tax sale is canceled, citing concerns over the inflated tax bills that resulted from the reassessment.

August 2006 A massive list of tax delinquent properties is in the process of being prepared. "Huge tax sale looms," headlines declare.

Autumn 2006 As the sale date draws near, property owners contact county officials in droves to remove their properties from the list. In addition to legitimate removals, dozens of people who have never declared bankruptcy have their properties removed by claiming bankruptcy protection.

Oct. 31, 2006 The original list of 22,000 delinquent properties is reduced to 7,200, which generate $30 million in revenue at a tax sale that goes on for 20 hours. It's the first sale in three years.

November 2006 Questions begin to surface almost immediately about the way properties were removed from the original list. FBI agents begin investigating.

Dec. 10, 2006 The Times reports that the Allen Funeral Home in East Chicago was protected from a $440,000 delinquent tax bill through the expired bankruptcy of a dead relative of the business's owner.

Winter 2007 A Times review finds that many of the 170 properties that were removed from the 2006 tax sale list for bankruptcies were questionable.

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