Unlike a mortgage, a credit card balance doesn't give a card company a lien on your house. A mortgage lender can foreclose and take your house, sometimes without going to court. A credit-card company must go to court to attach your balance to real estate. If your company sells your account to a debt collector, the collection agency can do the same.
To get its hooks into your home, a credit card company needs a judgment lien. It gets the lien by suing you in court and proving to the judge that you owe the money. You get to present your side of the case, but if the judge agrees with the card company, the company can file the judgment with the county to get a lien on your house. In some states, the lien goes on automatically after the judge rules.
Limits on Liens
Most states offer some sort of homestead exemption, protecting part of your home value. North Carolina, for instance, exempts $35,000. If, say, you have a $150,000 in first and second mortgage debts on your house and it's worth $180,000, your other creditors are out of luck. Between the exemption and the mortgage, there's no value in your house to attach to. The credit-card company can still try garnishing your wages or your bank account.
Even if your house is worth enough to attach a lien, the card company is unlikely to foreclose. It's often expensive, and any liens already on your house, such as your mortgage, get paid off first. When the time comes to sell or refinance the house is when you have judgment-lien problems. Any new or refinanced mortgage on the house would get paid off after the lien, and no lender is going to accept that. You have to get rid of the lien, which usually requires paying the creditor.
If you offer a partial payment to get rid of the lien, the card company may agree. The company may figure some money now may be better than waiting until you're ready to sell the house. If the company didn't follow your state's procedure when it applied the lien, you can go to court and possibly get the lien voided. All liens expire, so you can try to wait until your state's statute of limitations kicks in and see if the lien will fade away.
- Bankruptcy Law Network: Can A Credit Card Or Unsecured Debt Put A Lien On My House?
- Nolo: Can a Judgment Creditor Foreclose on my Home
- Susanne Robicsek: North Carolina Bankruptcy Homestead Exemption
- Nolo: How Creditors Enforce Judgments
- Nolo: Ways to Stop a Creditor From Collecting a Judgment
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Sep. 18, 2020.
- Experian. "Tax Liens Are No Longer a Part of Credit Reports." Accessed Sept. 18, 2020.
- Experian. "What Affects Your Credit Scores?" Accessed Sep. 18, 2020.
- Federal Trade Commission. "Fair Credit Reporting Act 15 U.S.C § 1681," Page 22. Accessed Sep. 18, 2020.
A Durham, NC resident, Fraser has written about law, starting a business, balancing your budget and fighting evictions, among other legal and financial topics.