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Credit Card Debt & Foreclosure Advice

Can you pay bills with credit card
Mark Cappel
UpdatedNov 27, 2023
Key Takeaways:
  • Credit card debt may lead to home foreclosure, but this is rare.
  • Creditors can garnish wages, levy bank accounts, and place liens on property.
  • Learn your rights and liabilities under your state's laws.

Will I have to give up my home because of credit card debt?

I ran up a lot of credit card debt that I can't afford to pay. What will happen if the creditor sues me? Will I have to give up my home because of credit card debt?

The answer to your question: "Will you lose your home over credit card debt?" is most likely no. A delinquent credit card debt will rarely cause you to lose your home to foreclosure.

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 consumer voluntarily gives up their 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 for public relations, as many people would be much less likely to use credit cards if they thought their use might result in them losing 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.

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Credit card debt and foreclosure - what needs to happen?

Here are the steps that a creditor would need to take to forclosure on a home if you have unpaid credit card debt:

File a lawsuit

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.

Receive a court 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.

Collect on the judgment

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 if a 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 resource Collections Advice to learn more about your rights in collections.

Pro tip: Each state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

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 legally in some states, it is unlikely a creditor will take your home to repay your credit card debts. However, as mentioned before, creditors will 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.

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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 Debt Help page.

I hope this information helps you Find. Learn & Save.




AAnthony, Feb, 2012
Hello Bill, My question is regarding forclosure due to delinquent property taxes. I was laid off for a year now and have fallen behind on taxes. I have until October 2012 to pay two years of delinquent taxes or be foreclosed on. Can I file bankruptcy and add the taxes on it? or will the tax company who bought it able to do a 5 year plan alone with me? Also, If they do take property and I do not file chapter 13 due to being unemployed and not approved, will I still get my 15,000 exeption homestead in Illinois?Thank You,Anthony
BBill, Feb, 2012
Anthony, because your house is at risk, I strongly advise you to seek professional legal advice. If you can't afford to pay for it, seek legal aid through Illinois Legal Aid.

I don't think a long-term payment plan will be offered on your delinquent property taxes. I also do not believe that you can discharge the debt in bankruptcy, though you should discuss that with a bankruptcy attorney, as well as whether filing for BK can delay any actions against you.

I do believe that your homestead exemption applies, but as I am not able to give you legal advice, please also discuss this with an attorney.
bbrittany, Feb, 2012
I live in NC and have a lien against my car for some bad credit card debt. Can they take my tax refund to pay this debt?
BBill, Feb, 2012
Private judgment-creditors do not have an inside track with the IRS. What you suggested does not occur. You mentioned North Carolina. See the resource North Carolina Collection Laws to learn more.
JJ, Jan, 2012
I was in a car accident in 2003, and my lawyer said he would take care of my creditors. Now, after 9 years, I received a letter saying I owe almost double the original debt. I own a mobile home and property that is on my name and a friend's name. Can they put a lien or anything on my property?
BBill, Jan, 2012
You indicated you reside in Louisiana. Louisiana law is unique among the 50 states because it is based on Napoleonic code, (the French civil code), Roman law, and Spanish civil law. The other states are rooted in English common law. I barely scratched the surface studying Louisiana law, and would be doing you a disservice by guessing at your rights and liabilities. Consult with a Louisiana lawyer who has consumer law or civil litigation experience. Please return here to share what you learned.

In the meantime, validate the debt because a debt that cannot be validated may not be collected.
KKillermery, Dec, 2011
I live in Texas I have a debt of $4000, I try to work a payment plan with the collectors, but they told me I had intill the end of the year or they will place a lean on my house I am still paying for and don't want to sell. This calls just started a couple of weeks ago and I haven't receive any letters from them in the mail. Can they do that?
BBill, Dec, 2011
A lender or collection agency can place a lien on your property only after they receive a court judgment in their favor. I recommend that you read about collection laws in Texas. This article will help you understand the tools available to your creditor. For example, Texas does not allow, in general, wage garnishments.

The collection agency is obliged to work within the framework of the law, in a fair manner. Read article about collections advice.

It is my understanding that, in Texas, you can have a lien against your home removed, through the local county court, due to the home being your homestead and the exemptions in Texas. I believe that even if you sell the house and there was a lien present that you can keep the proceeds from the sale and they are protected for up to 90 days from garnishment. I am not an attorney, so you should speak with one if you want an authoritative answer.
AAndrea Vanizu, Nov, 2011
Hello, My uncle made a contract with a law firm to settle his credit card debt. He had to conform to 3 payments. He made the first one but unfortunately was unable to make the second one. Now the law firm is refusing to make an adjustment and are threatening to sue him in court. If he was taken to court can the judge ask the law firm to consider a new arrangement plan since he was willing to make the payments instead of wage garnishing and the other consequences. Thank You.
BBill, Dec, 2011
As your uncle defaulted on the payment arrangements he set up with the law firm, it seems the likeliest event, if the law firm does sue him, is that a judgment will be entered against him. A judgment could lead to a wage garnishment and a bank levy, depending on the state collection laws.

Because the law firm is threatening to sue him, but has yet to do so, he should try again to work out a payment schedule before he is sued.