Foreclosure Advice & Credit Card Debt: Can Credit Card Companies Put a Lien On Your Home?

Many homeowners are struggling just to hang onto their homes. They may be on the brink of foreclosure – and can see their way to staving it off – but are being hounded by other creditors, ie, credit card companies.

Credit card companies can be quite vicious when trying to collect. The most unscrupulous will outright lie to you. They’ll threaten to garnish your wages and put a lien on your home. To paraphrase popular debt freedom guru Dave Ramsey, “The way to tell they’re lying is to look and see if their lips are moving.”

So, let’s answer this question in detail so you can rest a little easier if you’re trying to prevent foreclosure, pay credit card debt and hang on to your home.

Question: Can Credit Card Companies Get a Home Lien on My Property

Answer: The short answer is, yes. BUT, it is highly unlikely that it will ever happen, for the following three reasons:

I. State Law: State law dictates how creditors can collect on judgments. And, herein is the saving grace for homeowners who are worried about credit card lenders putting a home lien on their property – collecting on a judgment is a process. A process that is time-consuming and expensive for those trying to collect.

II. Pay Off Secured Creditor: The second reason you shouldn’t worry about a credit card lender putting a home lien on your property is that they are not a secured creditor. A secured creditor is a person/entity who holds title to an asset of a debtor. This asset can be sold to repay a debt if the debtor defaults.

For example, your mortgage company is a secured creditor because they hold title on your home – it is theirs until you pay off the mortgage in full. Another example, your car loan company. They hold title to your car until you pay it off.

What does a credit card company have of yours that they can repossess and sell off to pay the debt if you default? Nothing. Hence, they are an unsecured creditor.

So, if they put a home lien on your property and try to sell it to get the money you owe them, they would have to pay off the mortgage company(ies) first. Many homeowners have two mortgages (eg, in the case of an 80/20 mortgage). One holds first position; the other holds second.

If there are no other secured creditors, this would put the credit card company in third position – ie, third on the list to be paid.

III. Risky: Finally, it is highly unlikely that credit card companies will put a home lien on your property because it is highly unlikely that they will sell your home for enough to satisfy the debt (and their costs in trying to collect the debt).

Think about it this way: if you had equity in your home, you probably wouldn’t be facing foreclosure as you could refinance and pay off your credit card debt.

But in this economy, many homeowners are under water. Meaning, they owe more on their homes than they’re worth. So if the credit card company put a home lien on your property and tried to sell it to collect on the judgment, they probably couldn’t sell it for enough to: (i) satisfy the debt you owe them; (ii) recoup the the fees it costs them to bring the suit; (iii) collect on the debt you owe; and (iv) pay off secured creditors.

Exceptions: When a Credit Card Lender May Consider Putting a Home Lien On Your Property

Following are some cases where credit card lenders may be more likely to try to put a lien on your home:

If you have a lot of equity in your home;

If you own your home outright; or

If you own investment property.

Even in these cases though, it is highly unlikely that a credit card company will go through the expense of putting a home lien on your property And even though it is technically possible, it practically never happens. So even if they threaten you with this, know that they’re just blowing smoke.

After your financial situation turns around, you can then turn your attention to paying your credit card debt – which you shouldn’t just walk away from, by the way. Not only is it morally your responsibility, your credit card debt is legally your responsibility as well. But, the roof over your head should take precedence. So focus on preventing foreclosure and getting back on your feet first.

For more on this topic, read Foreclosure & Credit: How Does Foreclosure Impact Your Credit Report? and Credit Report Repair: Credit (FICO) Scoring Explained.

P.S.: Get the FREE credit repair report, 6 Credit Repair Myths and 6 Specific Ways to Raise Your Credit Score and start repairing your credit.

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Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.