Foreclosures and mortgage: the rules to protect your property

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Emma Potter

The Revenue-Collection Agency has the task of recovering the sums owed by taxpayers through a series of tools ranging from mortgages on real estate assets to foreclosure. These measures, although legitimate, are regulated by precise rules that impose limits on the Agency’s action, guaranteeing the taxpayer some forms of protection.

Understanding the mechanisms and legal constraints behind these procedures is essential for those who find themselves in economic difficulty or are at risk of suffering collection action.

In this article we will analyze in detail how mortgage and foreclosure work, what are the conditions under which they can be applied and, above all, what are the protections that the law provides for the taxpayer.

What are the thresholds beyond which a real estate foreclosure is triggered? And what precautions can the taxpayer take to avoid the risk of losing their home?

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Mortgage on real estate

The mortgage on the properties is a precautionary measure that the Revenue Agency can adopt as a guarantee of the credit towards the taxpayer. However, there are specific limits that must be respected. Registration of the mortgage is only possible if the taxpayer’s debt exceeds 20,000 eurosand the amount for which it is registered must be equal to double the total credit.

These constraints are established by article 77 of Presidential Decree no. 602/1973, subsequently amended by article 52 of Legislative Decree no. 69/2013.

Before proceeding with registration, the Revenue Agency sends a prior communication to the taxpayer, giving him 30 days to comply. If the debt is not repaid or paid in installments within this period, the mortgage can be registered in the competent registry.

The cancellation of the mortgage occurs only with full payment of the debt or following a total relief issued by the taxing body.

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Real estate foreclosure

Real estate foreclosure is one of the most severe actions that the Internal Revenue Service-Collection can take against a delinquent taxpayer, but it is subject to strict limitations and safeguards to avoid abuse. Before it can be started, a mortgage must already have been registered on the debtor’s property, as a precautionary measure.

Only after six months from the registration of the mortgage, if the debt has not been paid, paid in installments, or has not been subject to relief or suspension, can the Agency proceed with forced execution through foreclosure.

The legislation provides that real estate foreclosure can only be activated if the total credit to be recovered exceeds 120,000 euros and the value of the debtor’s property is also higher than 120,000 euros. This criterion is designed to avoid putting modestly valued properties at risk in relation to the accumulated debt.

Furthermore, the law establishes specific protection for the taxpayer’s primary residence. The foreclosure cannot be carried out on the only property owned by the debtor if it is used for residential purposes, provided that the property meets certain requirements. In fact, it must be the registered residence of the debtor and cannot be a property classified as luxury, such as villas (land registry category A/8), castles or palaces of particular artistic or historical value (land registry category A/9), in accordance with the characteristics established by the ministerial decree of 1969. These criteria offer significant protection, preventing forced execution from affecting homes intended for ordinary family use.

However, if the taxpayer owns multiple properties or the property in question does not meet the requirements of a principal, non-luxury residence, the foreclosure may proceed. Foreclosure involves selling the property at auction, and the proceeds are used to pay off the debt.

If the sum obtained from the sale is greater than the debt, the remainder is returned to the taxpayer.

It is important to note that real estate foreclosure, despite being an extreme measure, is the last action that the Revenue Agency undertakes, and before reaching this stage the taxpayer is offered various possibilities to regularize his position, such as debt repayment.

For this reason, it is essential to act promptly as soon as you receive a mortgage registration notice, trying to resolve the debt before the actual foreclosure occurs. The consequences of a real estate foreclosure can indeed be very serious, leading to the loss of the property and creating further financial and personal problems for the debtor and his family.

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Foreclosure by third parties

Third-party seizure is a further tool that the Revenue Agency can use to recover debts, directly involving the taxpayer’s third-party debtors. This procedure allows the Agency to ask third parties, such as the employer or the bank, to pay the amount due directly to the Agency, withholding it from the sums owed to the debtor.

Even in this case, however, the law imposes limits.

For salaries, the seizure can be carried out based on the income range: one tenth for salaries up to 2,500 euros, one seventh for those between 2,500 and 5,000 euros, and one fifth for salaries above 5,000 euros. These same limits also apply to severance pay (TFR).

Furthermore, specific protection is provided for the last salary deposited in the current account, which cannot be seized, remaining at the disposal of the debtor.

The seizure of pensions, however, follows a different procedure: the collection agent can only seize the part of the pension that exceeds one thousand euros, as established by article 545, eighth paragraph, of the code of civil procedure.

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How to manage a debt situation with the Revenue Agency-Collection

In the event that a taxpayer receives a tax bill or a communication regarding the registration of a mortgage or a foreclosure, it is essential to address the situation promptly and carefully. The first step is to verify the accuracy of the requested sum, carefully analyzing the document received to make sure there are no errors or inconsistencies.

If in doubt, it is advisable to contact a professional, such as an accountant or lawyer, to obtain personalized advice.

If the debt is correct, but you have difficulty paying it off in a single payment, you can request payment in installments. This option allows you to avoid measures such as foreclosure or mortgage, by deferring the amount due in installments that are sustainable over time. The Revenue-Collection Agency provides different payment methods based on the taxpayer’s economic situation, and timeliness in the request is essential to avoid worsening the debt position.

Furthermore, in some cases it is possible to request relief or suspension of payment, especially if you believe there are valid reasons to dispute the tax bill. The important thing is to never ignore the communications received, since a delay in the response could lead to the initiation of enforcement procedures, with much more serious consequences for the taxpayer’s assets.

In conclusion, promptly addressing a debt situation and seeking alternative solutions such as installment payments or relief can make the difference, avoiding the registration of mortgages or the seizure of assets or current accounts.