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Surviving Debt: Introduction

Most mortgage lenders require you to pay into an escrow account, and then the lender, through its servicer, pays your property taxes and insurance from that escrow account. Even if there is not enough in your escrow account, the servicer will typically pay your property taxes. You could eventually face foreclosure on your mortgage loan if you do not pay what you owe into your escrow account. Your servicer will usually do the same even if you do not have an escrow account—in that case, you face foreclosure if you do not repay the servicer for the taxes it has paid for you.

Surviving Debt: Reducing Property Tax Debt

Challenging the Assessment. Your property taxes are based on the assessed value of your property, and you can reduce your property taxes by successfully challenging your home’s assessment. You can challenge that the assessed value is too high. More commonly, homeowners claim that their home is assessed for more than similar homes in the neighborhood. How much other homes are assessed for and what their characteristics are is a matter of public record, and you may even be able to see this information online.

Surviving Debt: Managing Seriously Delinquent Property Tax Debt

Deferred Payment Plans. If you are behind by several property tax payments, you will also owe penalties and interest. Some (but not all) taxing authorities permit you to catch up on what you owe in installments to avoid a tax sale of your home. You will have to pay something toward your overdue balance while at the same time keeping up with new tax bills. This may prevent you from being charged more penalties if you stay current on the payment plan.

Surviving Debt: Contesting a Tax Sale

Once your property tax bill is seriously delinquent, the taxing authority will begin a process to sell your home to repay the tax debt. In some states, this same process can be used if you fail to pay your water or sewer bills. Your best chance to prevent or delay the sale is to act quickly. Your rights vary greatly depending on whether or not your state requires a court order before the tax sale can take place. Whether it does or not, a bankruptcy filing can stop the process. Other than that, you do not have strong options to prevent the tax sale.

Surviving Debt: Setting Aside a Completed Tax Sale

Generally, once a tax sale has been completed, you either manage to redeem the home, as described in the next section, or you lose the home. If you lose the home, a 2023 Supreme Court case provides that you are entitled to the amount the home’s value or sale price that exceeds the amount owed on the tax bill.

Surviving Debt: Redemption Following the Tax Sale

In most states, even after the tax sale has been completed, you still have a chance to save your home through a process called “redemption.” You have a specified period of time to do this, and this deadline is strictly enforced, so it is critical that you act within your state’s deadline.

Often, you have as long as a year to redeem. But time periods vary, and the redemption will be much simpler and often for less money if you act quickly after the tax sale.

Surviving Debt: Introduction

An important and increasingly widespread category of consumer debt is fines, fees, surcharges, and other costs assessed by courts, state agencies, or even private parties when a consumer violates or is accused of violating criminal, traffic, or municipal law. This category includes debts stemming from everything from a traffic ticket, to a municipal fine, to a fee for using a government-appointed lawyer, to the premium on a commercial bail bond.

Surviving Debt: Identifying the Type of Criminal Justice Debt You Have

When you are being dunned for a debt, it is important to determine if it is criminal justice debt, and, if so, the type of debt and to whom the debt is owed. This will often determine how you respond to that debt. If you think a debt might be from a criminal proceeding in which you had a lawyer, contact the lawyer you had in that proceeding to ask them to send information about how much you owe, to whom, for what, and your options for payment.

Surviving Debt: Why You Should Pay Special Attention to Criminal Justice Debt

In most states, not paying criminal justice debt can result in your imprisonment. Outstanding criminal justice debt can lead to your arrest on debt-related warrants and your detention in jail while awaiting a hearing to explain the reasons you did not pay. Your payment also may be a condition of your sentence or probation, and your probation may, in some cases, be extended until the debt is paid.

Surviving Debt: Defending Against Incarceration for Non-Payment of Criminal Justice Debt

If you face incarceration for non-payment of criminal justice debt, seek legal counsel and press your constitutional rights. The government should not imprison you because you cannot afford to pay a debt. The U.S. Supreme Court has ruled that it is unconstitutional to imprison you for debt without a meaningful consideration of your ability to pay or the availability of alternative punishments.

Surviving Debt: Keeping or Reinstating Your Driver’s License

Some states suspend drivers’ licenses for non-payment of traffic fines as well as other criminal justice debts. There is a national advocacy campaign (www.freetodrive.org) to stop this practice of suspending licenses for outstanding debts, and many states have recently changed or are considering changing their laws. Unfortunately, other states still have these laws.

Surviving Debt: Payment Plans and Other Ways to Delay or Reduce Payment

Especially with the assistance of an attorney, you may be able to reduce or even cancel (often called “remit” or “waive”) your criminal justice debt, either in whole or in part. Alternatively, you may be able to enter into a payment plan—or modify a plan you are currently on—based on your financial situation or other relevant factors. In some states, courts may also permit you to stop your payments altogether for a certain period if you are on public benefits or have limited income.

Surviving Debt: Asserting Your Rights Against Collection

Statute of Limitations. In some states, after a certain number of years, you no longer have to pay your outstanding criminal justice debt. How many years this will be depends on your state—the answer is found in laws sometimes called “statutes of limitations” or “statutes of repose,” or laws that say that after a certain number of years your criminal justice debt shall be “written off.” Federal court criminal justice debt can be collected up to 20 years after the debt is imposed or you are released from incarceration on the underlying charge, whichever is later.

Surviving Debt: Do Not Let Collectors Pressure You

Do not let debt collection harassment force you into wrong decisions. Make your own choices about which debts to pay first based on what is best for you.

You are not a deadbeat—circumstances outside your control prevent you from paying all your debts. The most common reasons people cannot pay their bills are job loss, illness, divorce, or other unexpected events. Creditors and collectors know this. The debt collector’s job is to try to convince you to pay their debt first. Your job, however, is to make the right choices for you and your family.

Surviving Debt: What Collectors Can Legally Do to Collect on a Debt

Most debts, such as almost all credit card obligations, medical bills, and cell phone charges are “unsecured.” In other words, you do not have to put up any collateral—such as your home or car—to secure repayment. An unsecured creditor collecting a debt that is not owed to the government can only legally do the following four things if you do not pay their debt:

Surviving Debt: Nine Ways to Stop Debt Collection Harassment

1. Investigate the collector. You may receive calls, emails, or other electronic messages from scammers pretending to be debt collectors. Do not make any payments unless you are sure that the collector is legitimate.

If the suspicious party has reached you by phone, ask for the caller’s name, company, phone number, and business address. Simply asking these questions may discourage a phony debt collector from contacting you again.

Surviving Debt: Illegal Debt Collection Conduct

The major law dealing with illegal debt collection conduct is the federal Fair Debt Collection Practices Act (known as the FDCPA). The FDCPA only applies to debt collectors (including collection attorneys), but state law may have similar requirements for the creditors’ own collection efforts.

The FDCPA and its regulations require collection agencies to take certain actions, including:

Surviving Debt: Credit Card Disputes

Sometimes credit card problems are the result of identity theft or an unauthorized user—i.e., when someone else uses your credit card without your permission. Advice on how to dispute these unauthorized charges is discussed in the identify theft section in Chapter 3.

Surviving Debt: Problems Finding a New Rental Because of Your Rental History

About 90% of landlords use a tenant screening report to evaluate your application for a new rental. Tenant screening reports have information on your payment history, your credit accounts and rental payments at previous addresses, as well as any past lawsuit to evict you or to collect past-due rental debt. Most landlords do not send information on your rental debt to credit bureaus or tenant screening agencies, but debt collectors hired by landlords do report that information. The tenant screening companies may also search court records for eviction actions against you.

Surviving Debt: Entries A-D

[Words in italics are separately defined in this glossary.]

Acceleration. When a creditor claims the total balance of a loan is due immediately. This cannot usually occur unless you have fallen behind on payments. In the case of a home mortgage, receipt of a letter stating that a loan has been “accelerated” is normally an important warning sign of foreclosure.

Surviving Debt: Entries E-P

Equity. Your equity in property is the amount of cash you would keep if you sold property and paid off all of the liens on that property. For example, if you own a house worth $100,000, but you owe $60,000 on your original mortgage and $10,000 on a second mortgage, you have $30,000 in equity. The same principle applies to cars and other types of property.