Tax Lien Sale - NJ

[myo1974]

Hi Everyone,

I have a couple of questions about Tax Lien Sales in NJ, but first a bit of background.

Filed for Chapter 7 in August 2013. We surrendered the house in the bankruptcy and stopped making payments at that time (no mortgage, but a very large home equity loan). We also stopped paying the property taxes.

Bankruptcy discharged in December 2013. We are still in the house, just riding it out and putting money away until we have to leave.

Still haven't heard anything from the bank, but now our house is going up for tax lien sale in June. I understand that in NJ if someone buys the tax lien, they have to wait 2 years before they can foreclose, and that if the lien does not sell, then the township can foreclose in six months.

My question is this...does that mean the foreclosure process would start in two years (or six months if the township held the lien) or would they just come in and take the house outright at that time? (hope that makes sense!) I'm thinking if the process would only be starting at that time, then it could still be many years before this house is foreclosed.

We were told by our attorney that the bank would be paying the property taxes. Obviously they haven't been. Will the bank be notified of the tax sale? I would think they would want to buy the tax lien so they don't lose their right to foreclose...

Also, can the person who buys the tax lien come after you for the back taxes? Can they attach your wages or get a judgment against you for the amount of the lien?

Any knowledge or advice would be greatly appreciated! Thank you!

[justbroke]

This is what I know of tax certificates, tax deeds, and tax deed foreclosures.

First, when you don't pay property taxes, the municipality (county, city, town) sells a tax "certificate" so someone willing to pay your taxes in exchange for payment in the future and some interest rate. There's also a possibility that a tax certificate purchaser could obtain title to the property in the future. The certificate purchaser/holder then waits 2 years (in most States, including Florida), before they can apply for a tax deed. The certificate holder cannot bother the homeowner during that time.

(The only thing I like about how they do it in Florida is that the tax certificates are actually sold at bid! The certificate purchasers bid from 18% interest all the way down to 0.25%. Before I filed in 2008, one bidder purchased a tax certificate for 0.25% interest which his the lowest!)

Once the two years has elapsed, the certificate holder can apply for a tax deed. The tax deed application is what starts the foreclosure process. There are many rules and amounts involved that I won't go into, but this is the point where the tax foreclosure starts. (The only problem for certificate holders is that many don't want the property, they just want the interest, penalties, fees and the original tax due! If the auction yields no bidders, the certificate holder MUST take the property. They may not want the property as it is likely in an HOA in Florida! So, strategy is key!)

As for your questions, the person who purchases a tax certificate cannot come after you personally, but may only go after the property. As such, this is called "in rem" or against property. This is not an "in personam" or personal lawsuit. A tax certificate holder's only recourse is to apply for a tax deed which forces a foreclosure sale. If they did their homework, then the property forecloses for the amount of the unpaid tax (including penalties, fees, attorney fees, late fees, special fees, any other fees they seem to want to add). In Florida, a homestead property can't be sold at auction for less than 50% of assessed value at a tax sale, plus the unpaid tax.

The bank is not noticed on a tax "certificate" sale because this is just something normal that the taxing authority does. It (the certificate itself) does not convey the property. When the foreclosure beings, the bank would be notified because the bank has an interest in the property.

[catleg]

I think there is a very active market in tax liens in NJ, the township should have no trouble selling it, then you can rest easy for 2-3 years until they try a tax foreclosure. Most likely the bank will start a foreclosure against you in the meantime and the tax lien owner just becomes an additional defendant. So overall I don't think it will have a major impact on your situation.