If you do not work with your creditor to pay your past-due balance or establish a payment arrangement after you fall behind on a debt, your creditor may resort to filing a lawsuit against you for the entire balance of the debt. After winning a judgment against you, the creditor may force the sale of your personal property, including your primary residence, to satisfy your financial obligation.
After a civil court awards a judgment to a creditor, it typically creates a lien against any real estate you own, including your primary home. A lien gives the judgment creditor an ownership interest in your real estate -- your home becomes collateral for the judgment debt. Once the court has placed a lien on your primary home in the creditor's name, you cannot give away, transfer or sell the home until you have satisfied the judgment.
A lien on your primary home gives the judgment creditor the right to force the sale of your home if you do not pay the judgment debt. If the creditor exercises this right, it may sell the home in a commercially reasonable manner, which may include a public auction or private sale. The judgment creditor will then apply the proceeds of the sale to your debt.
Forcing a home sale is an expensive prospect for a judgment creditor. The creditor must pay a real estate agent, broker or auctioneer to conduct the sale, and must typically pay for appraisals and other costs related to the sale of your primary home. For this reason, a judgment creditor will typically only force a home sale if it believes it can command a price high enough to satisfy the judgment debt and pay for expenses related to the sale. Also, if you have a mortgage on the home, your mortgage company's interests are usually of higher priority than the judgment creditor's interests. If you have little equity in the home or owe more than it is worth, the judgment creditor may not realize gains large enough to justify the expenses of selling your home.
Most states provide judgment debtors with exemptions for protecting a portion of their assets from liquidation. For example, Ohio law provides an exemption of $20,200 for a residence. This means that if your equity in an Ohio home is less than $20,200, the creditor cannot force the sale of your home. Some states also provide a wildcard exemption that you can apply to any asset to prevent liquidation. Others, such as Florida, prevent judgment creditors from taking your home in most cases. In Florida, you can exempt your primary residence and up to 1/2 acre of land in an incorporated area, or up to 160 acres in an unincorporated area.
Owen Pearson is a freelance writer who began writing professionally in 2001, focusing on nutritional and health topics. After selling abstract art online for five years, Pearson published a nonfiction book detailing the process of building a successful online art business. Pearson obtained a bachelor's degree in art from the University of Rio Grande in 1997.