Property taxes can be a significant expense for Michigan homeowners. Even people who have paid off their mortgage or never had one can potentially be at risk of losing their home if they become delinquent on their property tax payments.
Fortunately, that takes some time to happen. Under Michigan law, the “forfeiture and foreclosure process” takes three years.
According to the Michigan Department of Treasury, “Parcels are forfeited to the county treasurers when the real property taxes are in the second year of delinquency. Real property taxes which remain unpaid as of March 31 in the third year of delinquency are foreclosed upon by the Foreclosing Governmental Unit (FGU).”
Chapter 13 and property taxes
Homeowners who are behind in their property tax payments often wonder whether they can discharge that particular debt by filing for bankruptcy. Most people who own a home qualify only for Chapter 13 rather than Chapter 7, so let’s take a look at how property tax debt is handled in this type of bankruptcy.
Chapter 13 is often referred to as “wage earner’s” bankruptcy because it’s the type that most people who earn a regular income qualify to use. It involves establishing a repayment plan to creditors lasting three to five years.
Unlike Chapter 7, where many debts are discharged, and a number of assets are sold to repay the debts, the Chapter 13 filer keeps their assets and repays their creditors according to the plan approved by the bankruptcy court. Generally, delinquent property taxes must be repaid in full. Further, if the filer keeps their home, they’ll continue to owe property taxes for the years during which their repayment plan runs.
A repayment plan can help homeowners deal with delinquent property taxes
An advantage of filing for bankruptcy for those who have numerous debts is that it requires people to deal with their overall debt situation rather than focusing on one particularly large debt. Even though property taxes typically can’t be discharged in Chapter 7, by being able to discharge other debts, homeowners can be better able to manage non-dischargeable debts like property taxes.
Each situation is highly unique. That’s why it’s wise to get experienced legal guidance if you’re considering bankruptcy to determine whether it’s the right choice and how to make it work for you as you get a fresh start.
