Falling Behind on Your Property Taxes Can Lead to ‘Home Equity Theft’ in 12 States — How To Protect Yourself

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The IRS and state agencies can take your home to satisfy outstanding tax debts, but a new study shows that local governments in 12 states and the District of Columbia can take even more than what is owed.

A study by the Pacific Legal Foundation, a nonprofit legal organization, looked into the issue of home equity theft, a practice that allows local governments to take a homeowner’s property – and all of their equity – over an unpaid property tax debt of any amount and keep the remaining balance after the debt has been paid. The organization found that between 2014 and 2021, 8,600 homes and over $780 million in life savings were lost to home equity theft.

A Michigan county took a man’s home over a $8.41 underpayment and sold the property, leaving him with nothing, the Pacific Legal Foundation said. The Michigan Supreme Court found the county’s position unconstitutional, and the Supreme Court agreed.

However, there are ways to protect yourself.

Everyone should create and stick to a budget to stay on top of their spending and bills. There are plenty of budgeting tools you can use online for free or talk to a financial adviser to get your finances in order.

Get Tax Debt Help

Once you have your budget, the next step is to pay off all of your debts. There are several methods you can use to pay off debt. One way is to pay your debts from the highest interest rate to the lowest. You still need to make the minimum payment, and can even consolidate all of your debts into a single loan to help simplify payments.

You should also have an emergency fund. This fund should have three to six months’ worth of wages to cover emergencies, like not having enough money to pay your property taxes. You can put your emergency funds into a savings account or invest it — just make sure it’s easily accessible if you ever need to take it out.

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