Lawsuit challenges counties’ ability to pocket foreclosure proceeds

| Jan 7, 2021 | Uncategorized |

One remedy Michigan counties have against delinquent property taxpayers is foreclosure.

The money from a foreclosure sale would cover the tax bill, but because the value of the house usually exceeds the taxes owed, there’s usually surplus proceeds as well.

It’s long been a practice of Michigan counties to pocket surplus proceeds, but a new lawsuit is challenging the practice.

The plaintiff in the suit is the son of a homeowner that was foreclosed upon for backed property taxes. Kalamazoo County sold the house and netted $79,000 of which $14,500 went to paying off the backed taxes, the rest of money was pocketed by the County.

The plaintiff is challenging the legality of the practice citing a 2020 Michigan Supreme Court Case, Rafaeli v. Oakland County, that determined it was an unconstitutional taking for counties to retain the excess profits and that they should be paid out to the person foreclosed upon.

The problem for the plaintiff is that although the Court ruled the practice illegal, it never established a timeline dictating how long the County had to turn over the excess proceeds to the previous homeowner.

The counties are aware of the Supreme Courts ruling but have delayed returning the money until the state legislator passes a bill resolving the matter.

Protecting the rights of homeowners

Being foreclosed upon can upend your life. Your mind may be racing with questions you though you’d never have to ask, like where will I sleep at night? The uncertainty of the moment can be overwhelming.

Although it may seem like the sky is falling, homeowners have rights under the law. An experienced foreclosure attorney can provide a rigorous defense of your case in a court of law, ensuring your rights are protected and that your side of the story gets heard.