by B. Renee Robinson
The 2010 foreclosure crisis hit the nation hard and depleted many families of their homes and wealth. Subprime lending, bogus real estate agents, and mortgage companies that falsified documents of homeowners played a significant role in the housing crash. This destabilized many communities, led to high foreclosure rates, caused property values to decrease, and left homes abandoned. However, many homeowners are less familiar with foreclosure through tax liens.
A tax lien is a debt that is lawfully attached to property by the local, state, or federal government to collect a delinquent tax bill or other fees. Unresolved tax liens have left many people throughout the nation homeless. Bernie Coleman, a retired Marine Sargent, lost his home because of a $134 tax bill even though his property at the time was worth $197,000, according to the Washington Post’s article “Left With Nothing.” The tax bill increased from $134 to $4,999 because Mr. Coleman was suffering from dementia and did not have the capacity to pay his bill. Unfortunately his story is not as uncommon as you might think; many elderly, disabled, and poor people lose their homes because of tax liens, in addition to, not having the capacity to handle their finances.
Tax liens also come in the form of unpaid water bills, sewage (sanitation) bills, or any other government fees. You can also inherit tax liens with the purchase of a new home or commercial property if the previous owner’s debt was not satisfied. Investment in title insurance is critical during the purchase of property because it will eliminate unforeseen tax debt.
Here are some steps you can take to ensure your family is not plagued with a tax lien.
- Partner with trustworthy family and friends to review older family members’ finances to make sure their tax bills, water bills, etc. are current. If the bill is delinquent contact your local government office to set up payment plans.
- Use group economics by collectively committing monthly payments to a savings account for an older or low income family member’s tax bill.
- Double check to ensure your mortgage company pays your property taxes on time. Do not assume your tax bill was paid by the mortgage company because sometimes they submit late payments.
- Set up an escrow or savings account specifically for your taxes if your mortgage is paid off. This will help you plan for your taxes and possible tax increases.
- Negotiate outstanding bills with your local/state and federal government. More often than not you will find government workers willing to help you. If not ask for the manager or department head to resolve your situation.
- Ask questions! Understand what services you are receiving for your taxes and question increases on your bill.
Research the tax lien process where you live to see how it impacts your neighborhood. Understanding your rights as a property owner is a critical part of protecting and passing down generational wealth.