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IF I invest in tax lien certificates, what happens to my $ if the county goes bankrupt?
Given that the county is mandated by law to pay a certain % to lien holders, what happens if during the redemption period and before I can foreclose - the county I invested in files for bankruptcy? I'm thinking that I'd become a debtor because I loaned the county some money, then would I have to wait beyond the redemption time and until the bankruptcy court can do its thing and forgive the county's debts? Maybe it depends on which bankruptcy is filed, but could I end up With only pennies on the dollar of my investment as one of the county's creditors? Doesn't sound as though investing in these liens is altogether "risk-less", does it, especially in light of what's happening worldwide? If nations can go bankrupt, why can't counties and/or states? Where does that leave investors?
This question has been bugging me and I've yet to find answers in any book. Please help if you can and I thank you for your best explanation.
2 Answers
- 10 years agoFavorite Answer
When you invest in a tax lien and you purchase it from a tax sale, even though the redemption money comes from the county, it is not the county's money. The money comes from the delinquent tax payer, is paid to the county and then the county issues the investor a check. Bankrupt or not, it is not the county's money.
If the lien doesn't redeem and you foreclose, that has nothing to do with the county. You foreclose the right of the owner to redeem the lien. And then you own the property.
Think of it like this, you didn't loan the county money, you paid the taxes and gave a loan to the homeowner, not the county.
Source(s): www.TaxLienLady.com - kemperkLv 710 years ago
you are not loaning the county any money; you are loaning the property owner money.
Regardless the fiscal status of the county, if at the end of 3 yrs, the prop owner does not pay,
depending on how the county handles those sales; some permit the tax holder to go to court.
Others require the county to hold an auction. Thus, the cert holder gets $ or the prop.
Source(s): RE broker
