The sale of debt is expanding from past due medical accounts and unpaid credit card balances to tax liens. The private investors who purchase these debts are usually much more aggressive with their collection efforts.
Recently, Harwich has considered selling liens to private investors. The town has 326 properties with tax title liens. The amount owed in unpaid taxes is approximately $5.6 million, according to CapeCod.com.
Speeding up the collection process
Federal and state tax agencies can attach liens to property when taxes remain unpaid. The tax obligation may relate to estimated tax shortages or unpaid property taxes. The tax owed does not need to be tied to the property itself.
It has been rare that a government lien holder seeks to foreclose on a property in the land court. In Harwich, only four of five have been foreclosed on since the mid-90s. This means that liens often sit for many years. Liens are generally only paid when a property owner is trying to sell.
In our March 1 post, we discussed the process the government follows to obtain a lien. We also addressed how you can remove tax liens.
Once a state tax lien is placed against a property the interest is a steep 16 percent. This can quickly compound problems paying off the debt. The for-profit investors have been more aggressive seeking to foreclose on properties. This speeds up the collection process, but it also means that some people lose their homes.
As towns and municipalities across New England look to sell lien debt to private for-profit investors, it is critical to proactively resolve your back taxes. Often there are programs available that may help you avoid a lien. If one has already been filed against your property, speak with a tax attorney to find out what is required to have it removed.