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Property tax foreclosure is a growing issue for homeowners across Michigan. Falling behind on property taxes can lead to high penalties, excessive interest rates, and ultimately, the loss of your home. However, bankruptcy can be a powerful tool to stop foreclosure, reduce tax burdens, and provide a structured repayment plan. At Sigal Law Firm, we help homeowners explore bankruptcy solutions to protect their property and financial stability.
Understanding Property Tax Foreclosure in Michigan
In Michigan, unpaid property taxes become a lien on your home, taking priority over mortgages and other debts. If these taxes remain unpaid, the foreclosure process moves swiftly:
🔹 March 1st (Year After Taxes Were Due) – Delinquent taxes are transferred to the county, with a 4% penalty and 12% annual interest added.
🔹 March 1st (Two Years After Delinquency) – Taxes remain unpaid; the property enters forfeiture status, and the interest rate increases to 18% per year.
🔹 March 30th (Three Years After Delinquency) – If still unpaid, the county takes ownership of the property, and the homeowner permanently loses all redemption rights.
Without immediate action, homeowners risk losing their homes forever, often for a fraction of their value.
Can Bankruptcy Stop Property Tax Foreclosure?
Yes! Bankruptcy can stop the foreclosure process and provide a structured repayment option. Here’s how:
Chapter 13 Bankruptcy: The Best Option for Property Tax Debt
✔ Stops Foreclosure Immediately – Filing halts all collection efforts, preventing tax foreclosure and giving you time to catch up on payments.
✔ Repayment Plan for Delinquent Taxes – Past-due taxes can be included in a 3-to-5-year repayment plan, preventing further penalties and interest.
✔ Lower Interest Rates – While counties charge 12-18% annual interest, a Chapter 13 plan can reduce this significantly, saving homeowners thousands.
✔ Protects Equity & Homeownership – Allows homeowners to keep their homes while gradually paying off tax debt.
🔹 Example Case: A Michigan homeowner owed $7,500 in back property taxes. Facing foreclosure, they filed for Chapter 13 bankruptcy, stopping the process. Their debt was restructured into a 5-year repayment plan with reduced interest, allowing them to keep their home and regain financial stability.
Chapter 7 Bankruptcy: When It Might Help
✔ Eliminates Other Debts – While property tax debt generally cannot be discharged, Chapter 7 can eliminate credit card debt, medical bills, and personal loans, freeing up income to pay property taxes.
✔ Buys Time – The automatic stay pauses foreclosure temporarily, allowing homeowners to explore repayment options.
Chapter 7 is not ideal for those wanting to keep their homes but may be useful if a homeowner has significant unsecured debt and is ready to move on.
Timing Is Critical: When to File for Bankruptcy to Stop Foreclosure
Special Considerations for Property Tax Debt in Bankruptcy
🔹 Tax Installment Agreements – Some counties allow tax repayment plans. Filing bankruptcy does not automatically cancel these agreements, but the bankruptcy plan must account for tax payments to avoid default.
🔹 Water & Sewer Liens – Unpaid water and sewer bills often become property tax liens and must be included in the bankruptcy plan to prevent further penalties.
🔹 Special Assessments – These local government charges (e.g., sidewalk repairs) are treated as secured debts and must be repaid in bankruptcy.
How Sigal Law Firm Can Help
At Sigal Law Firm, we understand the urgency of property tax foreclosure and the stress it causes homeowners. Our team can:
✅ Assess your financial situation and determine whether Chapter 13 or Chapter 7 is the best option.
✅ Stop property tax foreclosure immediately by filing for bankruptcy protection.
✅ Structure a repayment plan that works within your budget while protecting your home.
Facing Property Tax Foreclosure? Take Action Today!
If you are behind on property taxes and risk losing your home, don’t wait until it’s too late. Contact Sigal Law Firm today for a free consultation. We will guide you through the bankruptcy process and help you keep your home and regain financial stability.
