If I'm delinquent with credit card debt can the creditor foreclose on my home?
I am delinquent on several credit cards accounts. one of them is about $28,000 which is 180+ days old.The original creditor is no longer trying to collect but instead is using a collection agency.Someone told me that this debt might have already been charged off and sold to such collection agency. could this be correct? I want to know if the collection agency can force me to sell my house in order to collect $28,000 thru the court. I have $200,000 equity in the property.My sister is co-owner of the house. Ther propery is our primary residence. If the creditor is not able to force us to sell the house, what is the likelihood that creditor can obtain a lien against our property. I live in Bayside NY. The reason that I became delinquent is because my husband left me and my 8 year old child. And to make matters worst Had decrease in of weekly pay from my job.
Yes, it is likely that the account has already been charged off and sold to a collection agency. It is possible that if the creditor wins a judgment against you and is able to place a lien on your home, they could potentially foreclose on the home. However, very few consumers lose their homes because of delinquent credit card debt. In fact, I would say that it almost never happens, except in certain bankruptcy cases in which the consumers voluntarily gives up his or her home. Although forcing the sale of a consumer's home due to credit card debt is technically possible in some states, it is a very costly and risky undertaking for creditors.
In addition, forcing the sale of debtors' homes would be extremely bad public relations, as many people would be much less likely to use credit cards if they thought it could cause them to lose their homes.
Unless your financial situation is somewhat extraordinary, you probably do not need to worry about losing your home due to credit card debt. Only if you own your home outright, or if you have a very large amount of equity in the house, could the taking of your home become a concern. Even in those cases, it is extremely unusual for credit card companies to seize property due to the time and cost involved.
Before going into detail, I can advise you to seek a debt consultation to see if you can get help with your debts. Bills.com has many pre-qualified debt counselors who can help you sort out your problems. Visit the Bills.com Debt Help page for more information.
Credit card foreclosure
Before seizing any property, a credit card company would first need to file a lawsuit against you in your county courts in an attempt to obtain a judgment against you. The court process alone can take many months to complete, and there is no guarantee that the creditor will win a judgment against you, though it probably will win if you owe the debt. Once a creditor obtains a judgment, it can initiate further court proceedings to collect on the judgment.
Although the execution of a judgment could theoretically involve a creditor seizing your home, there are several much easier ways to collect on a judgment which creditors usually prefer. These methods include wage garnishment and levies on bank accounts. Also a creditor with a judgment against you will likely place a lien on your home, meaning that when (or if) you sell or refinance the home, you would be required to pay the judgment out of the proceeds of the sale.
Your state law dictates what methods are available to creditors to collect on judgments. For example, Texas, Pennsylvania, and North and South Carolina do not allow wage garnishment for the collection of most judgments. Keep in mind that before taking any of these actions, a creditor must sue you and be awarded a judgment by a court with jurisdiction over the case, which usually means the courts in your county of residence.
Falling behind on a credit card does not always result in a lawsuit. Many people unable to make their payments suffer nothing worse than collection calls. Also, keep in mind that creditor threatens you with a lawsuit does not mean that they will actually sue you.
Frequently, collectors will threaten people with wage garnishment, bank levies, or even the seizure of a home, even though the collector has absolutely no ability to follow through with the threats. See the Bills.com resource Collections Advice to learn more about your rights in collections.
Reasons why a creditor may not try to seize your home
If a creditor with a judgment against you wanted to seize you home, it would first be required to pay off any mortgages or home equity loans you have on the home. Only after paying off the secured creditors could the credit card company sell the home at auction. Since auctions frequently bring less than half of the actual value of the home, creditors are taking a huge risk. Since they must pay the mortgage company up front for the entire amount owed on the mortgage, if the home brings less than expected at mortgage, they can actually lose money on the deal.
In addition, almost all states exempt a certain portion of the equity in a home from creditor execution; this amount ranges from $5,000 in some states to several hundred thousand dollars in others. If a creditor sells your home at auction, they must pay you your exemption amount, regardless of whether or not the creditor made that much money at the sale.
As you can see, this is a complicated and risky proposition for creditors, which is why it is almost unheard of for a consumer to have his or her home seized to repay delinquent credit card debt. Some states, such as Texas, do not allow creditors to seize primary residences to repay judgments regardless of the amount of equity in the home.
If you are being sued by a creditor, or think that a lawsuit may be filed against you in the near future, you should consult with an attorney to discuss your states exemption laws and what action a creditor could take against you under those laws, and what you can do to protect yourself. After speaking with an attorney, some consumers find that they are "judgment proof," meaning they have no assets a creditor could take to repay a judgment against them. This is especially common among elderly and disabled individuals.
The bottom line is that, while possible, it is extremely unlikely that a creditor would take your home to repay your credit card debts. However, as mentioned before, creditors can take other actions to collect on delinquent accounts, so you should look into ways to resolve your debts if you are struggling to repay them.
Debt resolution options
The first option that comes to many people's minds is bankruptcy -- if you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area to find out if filing bankruptcy is a viable options for you.
If you find that you cannot file bankruptcy, or simply do not want to file, there are several alternatives available, such as consumer credit counseling and debt settlement. To read more about these options, I invite you to visit the Bills.com Debt Help page.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Struggling with debt?
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Georgia credit card delinquency rate was 5%, and the median credit card debt was $390.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
