Michigan Homeowner Challenges State's Debt Collection Practices in Supreme Court

Chelsea Koetter has filed a complaint with the Michigan Supreme Court, arguing that the state's debt collection practices are unconstitutional. Her case stems from the 2021 seizure of her home in Manistee County due to an outstanding debt of $3,863.40 related to her 2018 property taxes. This amount included not only the original tax debt but also penalties, interest, and fees. Koetter's situation echoes a previous ruling by the Michigan Supreme Court in favor of Uri Rafaeli, whose home was similarly seized and sold, with the government retaining all proceeds. The issue gained national attention when the U.S. Supreme Court ruled last year that Hennepin County, Minnesota, violated constitutional rights by seizing a home over a property tax debt and keeping the profits from its sale. Chief Justice John Roberts highlighted the injustice of a taxpayer losing a home worth significantly more than the debt owed, emphasizing that such actions represent a disproportionate contribution to public finances. In her complaint, Koetter outlines the complex and confusing process homeowners must navigate to claim any surplus proceeds after a foreclosure. She asserts that a government employee's error contributed to her inability to fully satisfy her 2018 tax debt, leading to the seizure of her home. Koetter argues that the government should not be allowed to exploit such situations for financial gain, labeling the practice as a form of legalized theft. Koetter's case raises critical questions about the fairness and legality of Michigan's debt collection methods, potentially setting a precedent for future cases involving property tax foreclosures.