The New York Times recently published a story relating to one aspect of the foreclosure crisis that many a troubled homeowner will know all too well. When you're struggling to hold on to your home, the main reason is obvious: for one reason or another, you cannot afford the big mortgage payments rolling in every month. But the troubles don't stop there: increasingly, homeowners are finding themselves squeezed to the breaking point by property taxes they can't afford. Unfortunately for many homeowners, the pictures gets even grimmer. The good news: they won't be dealing with government tax collectors. The (really) bad news: they will be dealing with private bill collectors instead.
If you are a struggling homeowner and you've fallen behind on your property taxes, what will this mean for you?
The consequences of not paying taxes can be quite serious; the government can and does charge interest and penalties on past due amounts, and they are also empowered to garnish your wages. As you may know, taxes are one of the debts treated as priority debt by the bankruptcy system. What this means for you is that, although you can take care of many of your debts by filing for bankruptcy protection, discharge of tax debts occurs under far more stringent restrictions, and in some cases is simply not possible. The takeaway here is that getting your finances in shape is critical, and the earlier you do it the better. Even if bankruptcy protection will not simply make tax debt disappear, it will allow you to catch up on payments, free up other income to put towards taxes, and staunch the flow of money that could be lost to interests and penalties down the line.
The New York Times article tracks a troubling phenomenon that may not be new, but now appears to be growing: the sale of tax debt to private investors. Basically, cash-strapped state and municipal governments are opting to turn over responsibility for collecting past due taxes to private debt collections operations. The government entity receives an influx of cash, though they're obviously going to be selling the debt for less than it's worth. Private investors are happy to buy these debts which in many cases can turn out to be worth a pretty penny, especially after the collection agencies get finished dressing up the debts. It's true that the government charges penalties and interest on past due tax debt, but they don't do it at the scale of private investors. Government, especially local government, has public policy interest in collecting taxes without forcing people into foreclosure. Houses abandoned en masse make for dying communities, plunging revenues from taxes in the long term, and unhappy citizenry. What's more, the government, at least in part because its continuation depends on the will of the people, are not likely to abuse homeowners with double digit interest rates and outlandish fees. Where are the incentives to help homeowners for private investors?
The answer is that there are no such incentives. A private investor in the guise of collection agency has only one motivation: to collect their debt by any means necessary, and to make as much money on each debt as possible.This is very troubling trend, and it is unclear whether anyone is tracking its expansion or overseeing for signs of abuse.
If you are a homeowner struggling to make your property tax payments, this is just one more reason to get your finances in shape sooner rather than later. Not only will tax penalties continue to mount the longer they remain unpaid, you will also find yourself dealing with private collection agencies, which have fewer scruples about aggressive collection policies. Look at the big picture here: if you are in financial trouble, filing for bankruptcy protection will help you deal with ALL of your debts, dischargeable or not. Take control and call a North Carolina bankruptcy attorney today.