If you don’t pay your property taxes for long enough, then your house or property will go through the tax forfeiture process.
The important step in the tax forfeiture process is to send you a letter which says “notice of expiration of redemption rights.”
A notice of expiration of redemption rights in Minnesota is probably a letter from the county where your house is located saying that you have fallen behind on your property taxes.
If you receive this letter, you are in danger of losing your house to tax forfeiture. Tax forfeiture means that the county takes your property and any equity, and sells it to pay the back taxes.
HOW FAR BEHIND CAN I BE ON MY PROPERTY TAXES?
- This depends on which county you live in, but you can usually get 3 to 5 years behind before you will lose the property to tax forfeiture
Counties in Minnesota are usually much friendlier and more patient to work with than mortgage companies, so they will let you get farther behind before taking the property.
After all, they want someone to stay in the house and keep it nice. If the house is abandoned and not maintained, then it becomes expensive for the city or county to clean it up.
WHAT ARE MY OPTIONS?
There are three things you can do if you have received a notice of expiration of redemption rights.
1. Sell the house
You have until May of the year in which you receive the notice to sell the house.
If there is equity in the house, then this might be the best option as you will:
- Get some money from the sale
- Keep your equity from tax forfeiture
The downside to this option is that you must:
- Move house
- Clean up your house
So you should contact a realtor immediately if want to sell your house.
2. Call the county to negotiate a confession of judgment
This is a good option if you have enough income to catch up on the taxes, but don’t have a big lump sum to pay it all off at once.
In a confession of judgment, the county will:
- Ask you for 10% of the amount you are behind
- Set up a 5 or 10 year payment plan where you pay back the taxes with 10% interest on the arrears
You must also continue paying the new property taxes that come due each year.
3. File Chapter 13 Bankruptcy and pay the arrears over 5 years
This is a good option if you also have other debt, as Chapter 13 bankruptcy allows you to discharge unsecured debts like credit cards and medical bills while catching up on the property taxes.
You need to know that:
- Like the confession of judgment, the Chapter 13 won’t work unless we can prove that you have enough income to pay to keep the house
- You must also pay the other property taxes as they come due, and continue to pay any mortgages against the house
As a worst-case scenario you can file either a Chapter 7 bankruptcy or Chapter 13 bankruptcy and delay the forfeiture by 2 months.
You can do this even if you cannot afford to pay the property taxes.
This is a worst-case scenario because you will:
- Lose yourhouse and any equity that has built up in the house
- Have to move house at the end of these two months
This article concerns only Minnesota law and my experience in working with Minnesota counties and bankruptcy in the Twin Cities metro area.
Laws and procedures in different states and counties are different. This article is not legal advice.
You should not rely on the information in this article for important decisions and should instead talk with an experienced Minnesota bankruptcy attorney about your options.