Tax Liens Can Lead To Home Foreclosures In Massachusetts

Counties are selling tax liens to third parties, who then have incentive to foreclose on delinquent homeowners.

Few things in life are as certain as taxes. For Massachusetts taxpayers who have found themselves owing money to the IRS, the Massachusetts Department of Revenue or a local municipality, the inability to move past tax debt is of primary concern. The failure to pay taxes, once a lien is filed, can lead to significant hardship. There is a real danger of becoming homeless.

Government entities are able to issue tax liens against the homes of delinquent taxpayers. A tax lien is a government interest in a taxpayer's property, which can include a home, personal property and financial assets. In several towns across Massachusetts, some cash-strapped municipalities sell their tax liens issued for unpaid property taxes to private investors. These investors make money by charging interest on top of the tax debt. If left unpaid, the investors have great financial incentive to foreclose on homes. Nationwide, approximately 3 percent of homeowners default on their tax lien, worth an estimated $14 billion.

Since 2012, over 1,000 private investors have foreclosed on homes in Massachusetts Land Court, according to data collected by New England Center for Investigative Reporting. Original debts can start as low as several hundred dollars in property tax. Attorney's fees charged by the investor, along with penalties and interest, can multiply the debt astronomically. Consumer advocates have argued that a reform of state and local laws is necessary to protect homeowners who may not understand their rights or what is at stake when a for-profit private company buys a local tax lien.

Spokesman Brad Puffer of the Massachusetts Attorney General's Office indicated to the press regulators are considering the issue. "It is critical that these practices not unfairly enrich private debt collectors or lead to an increase in foreclosure for struggling families," he told The Boston Globe.

Not all municipalities use private investors to collect on past due property taxes. Boston, for example, keeps its tax liens in-house instead of auctioning them off. The IRS also does not sell its tax liens. Still, both federal and local governments have the authority to foreclose on a home as part of their collection actions - and will do so if the debtor does not pay.

Tax Liens Must Be Dealt With Immediately

For taxpayers facing a lien placed by the IRS or a local municipality, the situation is serious. While options exist for such taxpayers that can help avoid foreclosure, further delay can be devastating. Offers in compromise, payment plans, and other options can help a taxpayer keep a home and bank account secure.

Tax attorney Theodore L. Craft can help taxpayers behind on their federal, state and local tax obligations to understand their legal options and defend their rights. An experienced attorney can negotiate with government authorities regarding tax obligations and work to mitigate or restrict collection actions by the government.

Keywords: Tax, property tax, tax lien, foreclosure