Story by Fatima Rahmatullah

Eyewitness News Reporter

CHATTANOOGA (WRCB)-- Hamilton County leaders are trying to avoid a federal lawsuit for overcharging people on their property taxes to the tune of $300,000, since 2002.

The Hamilton County Trustee's Office is working with federal investigators.

They say some people who filed for bankruptcy, were being charged penalty fees for overdue property taxes.

County commissioners met Monday to discuss how they should go about repaying that money.

The Trustee's office will send letters to about 3,000 Hamilton County residents.

Many of those will get back the money they overpaid the county in property taxes with interest.

"We were struggling for a lot of years, even before mother died we were struggling," says Bobby Ford.

Bobby Ford's home has been passed down to him from his family. Ford and his mother filed for bankruptcy nearly eight years ago. The Hamilton County Trustee's Office charged them interest penalties for late and unpaid taxes, money they never should have had to pay.

"They were charged 12% in some cases as it should have been. In some cases they were charged 18%. The people that were overpaid, they will get that money back in addition to the base amount," says Hamilton County Trustee Bill Hullander.

The Hamilton County Commission decided last week to give back the overpaid property taxes totaling nearly $300,000. The County will now pay an additional 2.43% in interest.

"This investigation that's been going on has ended up over a half a million dollar mistake. So they're folks out there we will owe this $300,000 plus interested back to," says Hullander.

The Trustee's office will send the money directly to homeowners instead of mortgage companies.

"We're afraid if we send a check out with some explanation with Bank of America that has 55 million home mortgages, how are we ever going to know that person got an appropriate response and was applied to the correct account," says Mike Carter.

Homeowners like Ford are happy to hear about the refund. He plans to pay off his house.

"Paying this Chapter 13 up as far I can get it paid off. The quicker I can get it paid off, the more comfortable I can live," says Ford.

The audit of the Trustee's office should be finished next week.

Detailed letters and checks will be sent next month to all the people who were overcharged.

The investigation did reveal several hundred thousand dollars in unpaid property taxes, but the county should get that money once those bankruptcy proceedings are finalized.