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Information About Debt in Collections and Buying a House

I have a medical bill that is about to go into collections, if I am planning to buy a home, will they put a lien on it later?

I am about to buy my first house and there are some items in collections on my credit, which I know I will have to pay at closing. I have a hospital bill which was not covered by my insurance and they are about to put it on my credit also. I was trying to get into a house before they put it on. If they put it on after I buy the house can they take my house or put a lien against my home. The hospital bill is for 13,000.

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Bill's Answer
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The fact that the creditor is planning to place this delinquent medical debt on your credit report does not mean that they will be able to take any action against your property. A creditor cannot generally try to seize or place a lien on your home until after it obtains a judgment against you. In order to obtain a judgment, the creditor would be required to file a lawsuit against you and have the court enter a judgment against you. If the creditor sues you, you should be given the opportunity to respond to the lawsuit and to appear in court to argue your case; a judgment being taken against you is not something that generally happens without your knowledge, and is a process which usually takes at least a few months to complete. However, if the creditor does decide to proceed with a lawsuit against you and obtains a judgment, it would likely be able to place a lien on your new property. Completing the purchase prior to the judgment being entered would not prevent the creditor from obtaining a lien against your home.

In my experience, it is extremely rare for a creditor to actually seize a judgment debtor’s property for the repayment of an unsecured debt, such as the medical bill you describe in your question. While it is legally possible in many states for judgment creditors to seize property, I have very rarely seen an unsecured creditor take such extreme measures to secure the repayment of a debt. The primary reason is that unsecured judgment creditors are considered junior encumbrances to most other secured loans on the property. This means that, if the creditor wanted to seize the property, it would first be required to pay off the more senior encumbrances, such as any mortgage holders and home equity lenders. In many cases, this means that the creditor would be required to pay out many hundreds of thousands of dollars before the creditor can even try to sell the property. In addition, the property would likely be sold at auction, so the creditor would likely receive much less money for the property than it is actually worth. These two facts combined mean that seizing property can actually result in unsecured judgment creditor losing money rather than successfully securing the funds owed by the debtor.

Again, you should remember that an unsecured creditor cannot take any action against your property until it has sued you and had a judgment entered against you. It is very possible that this creditor may take no legal action against you and may never place a lien on your home. However, if the creditor does decide to file a lawsuit against you, I would encourage you to consult with an attorney to discuss the options available to you. Also, you may wish to speak with an attorney prior to closing on your new home to further discuss the possible implications of this outstanding debt on your new property.

I wish you the best of luck in resolving this and your other debts. For more information about debt and to read about several options available to consumers struggling to repay their bills, I encourage you to visit the Debt Help page.

I hope that the information I have provided will help you resolve your debts and help you Find. Learn. Save.



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