If you do not pay a credit card bill as you agreed, the credit card company can take different actions to collect their money from you. Some actions, like phone calls at all hours of the day and evening, are just an inconvenience. However, if you go long enough without paying, the collection methods can get more aggressive, including placing your home at risk.
Attachment Lien
Most credit cards are unsecured debt. Generally, when you do not pay these debts, the recourse is limited. Creditors often resort to collection calls and letters before getting more aggressive. In time, a credit card company may file a lawsuit against you for the debt, and receive a judgment. When it receives this judgment, the collection techniques may become more aggressive, and the creditor may seek a garnishment of your wages or attach your bank account. A court may also place a lien on your primary residence.
Forced Sale With Lien
Usually, homeowners pay a court-ordered lien against the home when it is sold in order to deliver clear title to the buyer. A creditor must generally wait until a sale occurs to collect the debt. In some cases, the creditor could ask a court to foreclose on your home to pay the bill. The creditor's lien would be paid in this case after any other mortgages on the property, meaning the credit card company may not receive much, especially when you figure the legal fees that it will have to pay. A credit card company is very unlikely to do this unless there is substantial equity after all liens are paid, and you owe them a high balance.
Bankruptcy
Credit card debts that you are unable to pay may force you into bankruptcy. In bankruptcy, you can generally protect a certain amount of home equity from going to pay creditors. If you have more equity than your allowable exemption, you will be forced to sell your home, and the trustee will use the non-exempt proceeds to pay all of your creditors, including the credit card debts.
Credit Card Consolidation
Many people consolidate their credit card debts into separate consolidation loans in order to reduce their payments. Often, in order to receive the lowest possible interest rates on these loans, consumers allow the consolidation company to secure the loan with a second mortgage on their home. If you do this, you have converted unsecured credit card debt to debt secured by your home. In this instance, if you suffer a financial setback, and cannot make your mortgage payments, the bank could foreclose on your home, forcing its sale.
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