Can Credit Card Companies Put a Lien on Your Home?

Several risks come with not paying your credit card bills. You may accrue late fees and interest that further increase your debt, your credit card company may send your account to collections, and you may have a damaged credit score – making it harder to secure loans in the future.

One option that creditors have is to put a lien on your house, which is a legal claim to your property. The creditor will use the profits from the sale of your home to pay off the debt you owe.

 Credit card companies usually will not directly put a lien on a house – that is more common with banks seeking home loan repayments. However, they may do so through legal proceedings. This guide will answer if credit card companies can put a lien on your home and what that process looks like. Use this information to protect yourself and your assets, even if you are currently struggling financially.

Can Credit Card Companies Put a Lien on Your Home?

The easy answer is yes, credit card companies can put a lien on your house. They can file a claim for your property to cover unpaid debts. However, the actual answer is more complicated. A credit card provider cannot simply place and lien and take possession of your home.

Instead, they first need to sue you for the unpaid credit card debt and receive a judgment in their favor. Once they have that judgment, they can move forward with claiming your assets, which involves putting a lien on your house.

This can be good news for someone who is struggling with credit card debt. The legal process can be slow, giving the debtor time to pay off some of the money. If you are currently in this situation, you also might be able to work with bankruptcy attorneys during this process to reach a more stable financial situation.

How Does a Judgment Lien Work?

If the credit card company sues someone for unpaid debt and wins, the court may put a judgment lien on any available assets. This gives the company a legal claim to any assets that can be used to pay off the debt. This is considered a nonconsensual lien because it was attached without the debtor’s permission. For example, when someone takes out a mortgage, they actively agree to use their house as collateral. When someone takes out a credit card, they rarely think they will lose their house if they cannot pay the debt.

It is also useful to note that credit card debt is often a form of unsecured debt, which means it isn’t tied to any assets. This is different from secured debt that could be tied to your car, boat, home, or other tangible asset. The unsecured nature of the debt also makes it harder for creditors to secure a lien on the assets.    

If the court finds favor with the credit card company, it becomes the judgment creditor while the homeowner becomes the judgment debtor. Once the debtor has a lien on the property, they may be limited in what they can do with it. They might not be able to refinance their loan, sell the house, or make other financial changes without paying off the lien first. 

A lien doesn’t necessarily mean that the judgment creditor will immediately take control of the house. Instead, it means that when the homeowner decides to sell the property, any proceeds go toward paying off the lien first. It’s up to the debtor to figure out how to clear the lien, either through paying the debt off before listing the house or working with debt collector agencies to settle it.

How a Lien Can Impact Homeowners

A lien caused by credit card debt can affect homeowners in several ways. While a homeowner might still be able to live in their home, they may face other challenges and financial limitations. Failing to address debt from credit card spending can also put homeowners at risk of other financial difficulties, like failing to make mortgage payments. Here are a few ways a homeowner is affected by a lien. 

• The property cannot be sold: Buyers often check for liens before they purchase a home. Even cash buyers will look for liens or take out title insurance to avoid purchasing properties with unaddressed liens. Open liens will either deter buyers or limit the profits you take when the deal closes. 
• The property has limited refinancing options: Homeowners may struggle to refinance if there is an active lien on the property. Many lenders want the liens addressed before they will move forward with refinancing options. This also means homeowners might have a hard time taking out a home equity line of credit (HELOC). 
• The owner may accrue additional interest and legal fees: The judgment amount may increase over time because of the added interest and legal fees. This makes the debt even more expensive and harder to pay off. Addressing debt as soon as possible is essential for preventing it from growing.  
• There is an increased risk of foreclosure: Although rare, some creditors may seek foreclosure to satisfy the lien. This is when the bank or creditor takes control of your property. 

If you cannot pay off the lien, you may want to see if a home sale is a financially viable option. You can use the profits from the sale to pay your debt and start fresh without any creditors seeking payment.

What Homeowners Can Do If Faced with a Lien

There is good news for homeowners who are receiving debt collector calls or facing financial difficulties. There are multiple options to avoid having a lien placed on your home so you can move forward without a court judgment. Here are a few options to consider. 

• Negotiate with the creditor: Instead of hiding from your creditor, work directly with them. Attempt to settle the debt for a reduced amount or set up a payment plan you can handle. This will keep the credit company from sending your account to a debt collector. 
• Seek legal assistance: Work with an attorney to explore your options, such as contesting the lien or negotiating terms. Even if the creditor takes legal action against you, this attorney can work to protect your assets. 
• File for bankruptcy: Bankruptcy may help discharge debts and remove liens. However, this depends on the type of bankruptcy you file and the final judgment from the court. This is often a last resort for many homeowners.  
• Pay off the debt: If possible, pay the debt in full to release the lien. Even making steady, regular payments can prevent companies from placing liens or trying to foreclose on a property. 

Know that it is never too late to make payments on debt. If you are actively working to pay your debt and making earnest efforts to work with the credit company, they will be less likely to take your account to court. Even if a lien is placed on your house, you can also work to eliminate it through regular payments.

Preventing a Lien from Being Placed

Many credit card companies don’t want to seek judgment against customers and receive liens on properties. They accrue legal fees as well and the entire process can be time-consuming. This is good news for customers who are in debt. It means they can take steps to avoid having a lien placed while they work on their financial situation.  

• Stay current on debt payments: Avoid falling behind on credit card payments, even if you are only making the minimum monthly payments. Making small payments regularly is almost always better than stopping your payments entirely. 
• Communicate with creditors: Reach out to creditors early if financial troubles arise. You may qualify for a hardship program that either stops your interest accrual or freezes your payments entirely for a few months. This can help you get your finances in order again.  
• Explore debt settlement: Consider negotiating with creditors before the debt escalates to legal action. Many companies are happy to receive even a portion of the money, even if you can’t pay the entire debt. 
• Monitor credit reports: Keep an eye on credit reports to detect any legal actions in progress. This will help you know when you need to secure a lawyer or potentially prepare to declare bankruptcy. 

Financial troubles are stressful, but hiding from them can only make your situation worse. Taking small actions and communicating with your creditors can help you find solutions that make all parties happy.

Can You Sell a House with a Judgment Lien?

It is possible to sell a house with a lien, but the lien must be paid off or resolved during the sale process. Your buyers will identify the lien on the house and will not be willing to take over the property unless it is cleared. 

The lien amount is often deducted from the sale proceeds. For example, if you sell your house for $300,000 and owe $200,000 on your mortgage, then the remaining $100,000 will be used to pay off the lien. If you owe the credit card company $20,000 then that would be submitted to them. Any leftover funds (after you pay your real estate agent) will be deposited into your bank account. 

A lien on the property isn’t necessarily a dealbreaker for buyers, but it can frustrate them if it slows the home sale. Buyers might also pull out of the sale if the seller isn’t actively working to remove the lien before the closing date. 

Talk to your creditor if you have a lien on the property that wouldn’t be resolved by selling the home. See if they would be willing to release the lien for a lower amount to receive the majority of the debt. This would allow you to clear the lien and move forward with the home sale.

Work With Your Credit Card Company Before it Places a Lien

Can credit card companies put a lien on your home? Yes, but it doesn’t have to reach that point. You have options if your bank accounts are empty and you owe money to various credit card companies or lenders. Many financial advisors or lawyers will give you a free consultation to review your case and discuss the next steps. Then you can decide how you want to move forward.

If you are ready to sell your house and have any liens on the property, work with a trusted real estate agent through FastExpert. An experienced Realtor can help you clear your liens so you can sell your house, pay off your debt, and use any profits for your next steps. They also might recommend legal experts to work with who can make this process easier.

Don’t run or hide from debt. Instead, take action so you can avoid creditors who can put liens on your home. While this is rare for credit card companies, it is possible. You don’t have to let your debt reach that point.