Can a Judgment Creditor Take a House?

When recovering delinquent payments, most creditors will send frequent collection letters and call debtors both at home or at work. Collection calls and letters serve as a reminder that you neglected to pay what you owe. The creditor's goal is to coerce you into paying your debt voluntarily -- thus preventing an expensive court battle. In the event you still do not pay off your delinquent balance, the creditor can move to seize your assets -- including your home.

Judgment Creditors

The court awards your creditor a civil judgment if it sues you for the debt and the judge sides with the creditor. Because the civil judgment gives the creditor a wider range of collection options, after winning a lawsuit, the creditor becomes a "judgment creditor." Only judgment creditors and government creditors can seize property you own.

Real Estate Seizure

The creditor can seize your home by registering its civil judgment with your county's Land Records office. Registering the judgment creates a lien against all homes and land you own within that particular county. As soon as the creditor attaches a lien to your property, it can call the lien due. If you cannot pay off the judgment when this occurs, the creditor can foreclose on your real estate and sell it. Doing so helps the judgment creditor limit or eliminate the financial loss it incurred when you left your debt unpaid.

Priority Order

Although a judgment creditor with a lien can seize your home, that does not automatically mean the seizure process is either simple or common. Should a judgment creditor opt to foreclose, it must eliminate all other liens your property holds that were filed before the judgment lien. Lien priority -- or the order in which liens were filed -- ensures that a lien holder cannot lose its claim on your property to any creditors that filed subsequent liens unless those creditors provide the previous lien holder with full financial compensation for its lien.

Considerations

Paying off a homeowner's existing real estate liens solely to earn the right to foreclose on the property and hopefully sell it for enough to cover the individual's debt is a risky and time-consuming venture for a judgment creditor. In most cases, a judgment creditor attaches a lien to your home not with the intention of seizing the property, but with the hope that you will sell the property sometime in the future. The proceeds from the sale of your home will be distributed among all the creditors that hold valid liens against the property before you receive any profit from the sale.

Time Frame

Judgments only remain enforceable for a limited period, which varies depending on your state's laws. After the judgment expires, the creditor loses its right to use a property lien to collect the debt from you involuntarily -- leaving you free to sell your home if you wish and eliminating the worry that your creditor could seize your home at any time.