Saturday, April 5, 2003

Can You Lose Your House Due to Credit Card Debt?

Can You Lose Your House Due to Credit Card Debt?

If you owe money to credit card company, it is possible it could eventually foreclose on your house. Unlike a mortgage lender, however, it is not something a company can do just because you are behind in your payments. Even if your creditor goes through the necessary legal procedures, it is rarely in a credit card company's interest to foreclose.

Types

    Debt has two classifications -- secured and unsecured. Secured debt is one that comes with a lien on your property, for example a mortgage, a home equity loan or an auto loan. If you default on these debts, the lender can use the lien to take your property. Unsecured debts include credit card bills, medical bills and home repair bills that don't come with liens. If you don't pay, these creditors have no way to collect unless they take legal action.

Judgment

    Your credit card company can't just take your house or your money for an unpaid debt, according to Santa Clara Law School, and if it does, you could sue. Instead, the company must file a lawsuit against you in court, requesting a money judgment. The judgment is a legal verdict that you owe the company a debt. The company can then ask the judge to place a lien on your home or any other real estate that you own. The exact procedure for filing a lien varies between legal jurisdictions.

Effects

    A lien doesn't force you to pay your credit card bill, advises the Nolo legal website. If you try to refinance your mortgage, however, the refinancing company may refuse. Lien payoffs are in the order of their filing. This means that if your house went to foreclosure, you would have to pay off the credit card lien before the refinanced mortgage. While you can legally sell a house with a lien on it, selling won't remove the lien, so buyers might prefer to look at other homes.

Foreclosure

    Once a credit card company has a lien on your house, it could try to foreclose, but it is not usually worth the legal fees. If your house has a mortgage, the lender gets his money before any remaining private creditors. Even if the credit card company launched the foreclosure, it must wait behind the mortgage holder and any earlier liens. The chance of seeing any money if it forecloses is usually slim to none.

Ending

    The simplest way to get rid of a judgment is to pay your debt. Once you settle with the company, it has to remove the lien, leaving you your house free and clear. Alternatively, you could wait them out. There is a statute of limitations on judgment liens, though in some states it could take 25 years before the lien expires.

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