“In 2021, on April Fools’ Day, Manistee County, Michigan, took the title on Chelsea Koetter’s home because of a small debt she owed on her 2018 property taxes. Unfortunately, this wasn’t a prank.
Four months after seizing her home, which she shared with her two sons, the government auctioned it off for $106,500. It kept the profit.
All told, Koetter owed the government $3,863.40, which included her initial tax debt as well as penalties, interest, and fees. She does not contest she was obligated to pay that. At issue is whether the county acted lawfully when it pocketed the remaining $102,636 after selling her house, a practice known as home equity theft.
The issue may sound familiar. In 2020, the Michigan Supreme Court ruled the practice unconstitutional after the government seized Uri Rafaeli’s home, then sold it and kept all the proceeds in excess of what he owed. His initial tax debt was $8.41.
The U.S. Supreme Court weighed in on the issue last year in Tyler v. Hennepin County, ruling unanimously that Hennepin County, Minnesota, violated the Constitution when it seized an elderly woman’s home over a debt, sold it, and kept the profit. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” wrote Chief Justice John Roberts, referring to plaintiff Geraldine Tyler, who had fallen $2,300 behind on her property taxes. The total came to $15,000 after penalties, interest, and fees. After the sale, the government kept what was left over—$25,000. The Court said that was illegal.
Instead of complying with a straightforward interpretation of the law, Michigan has attempted to dance around it, passing a byzantine debt collection statute that sends homeowners on a wild goose chase should they want their equity back.”