I live in Alabama with my adult disabled son. About 10 years ago there was a judgment against me from a credit card company for $12K. Our home is under both our names only because I handle all his affairs. It was actually purchased with med malpractice settlement money. I work as a substitute teacher as needed. The judgement is no longer on my report but I got a call from a collector threatening to take our home. Can they do that? Is there any way I can protect my son's home? If possible, I would take my name off the deed but remain on the mortgage (we have 65K mortgage on a home worth about 135K in a good market). I also have student loan debt for about 37K which I will be paying off when I get a full time position.
Although it may be possible for this creditor to seize and force the sale of your home in order to enforce it judgment against you, it is something that rarely actually happens. Debt collectors frequently threaten consumers with seizure of property, but they rarely follow through with such threats. More often than not, they make these statements to intimidate and frighten consumers who are unable to pay off their debts. A judgment creditor is much more likely to simply place a lien on your home than it is to actually try to seize the property. If you sold or refinanced the home, a lien would force you to pay the debt out of the proceeds of the transaction. Usually, a lien would only be a concern if you voluntarily sold or refinanced the home; liens are not intended to force the sale of property. Because you have an outstanding judgment, I strongly encourage you to consult with an attorney in Alabama to discuss what the creditor can do to enforce the judgment, and what steps you can take to protect your income and property. I also invite you to visit the Bills.com debt help page, where you will find a wealth of information for consumers who are struggling to pay their debts.
In order to seize your home, the judgment creditor would be required to pay off any mortgages or higher priority liens and encumbrances on the property. Assuming the judgment is only in your name, the creditor would likely also be required to pay your son half of the equity in the home based on a fair market value; since his name is not on the judgment, he is not liable for the debt, and would therefore be entitled to compensation for his ownership interest in the property if the creditor seized the property. As you can see, the creditor would be required to pay out a significant sum of money before it could sell the property. In addition, seized homes are generally sold at auction, and often sell for significantly less than their actual market value, which means that the creditor may pay out a large sum to seize a property, and possibly be unable to recoup its costs. Most creditors simply do not want to take such a large risk, which is why it is uncommon to see a home seized for enforcement of a judgment on an unsecured debt.
Another reason that most credit card companies avoid seizing homes to enforce debts is that they do not want to tarnish their image with the public. If people knew that they could lose their home if they fell behind on their credit cards, many would never use their cards. In addition, no credit card bank wants to be seen ejecting a mother and her disabled son from their home over a $12,000 credit card debt; such a story could easily reach the news media and could pose a serious public relations problem for the bank.
If, after speaking with your attorney, you are still worried about this judgment creditor attempting to seize your property, you may be able to transfer your interest in the home to your son, making him the sole owner of the property. However, since you already have a judgment against you, this transfer may be viewed as fraudulent if the creditor ever challenged it in court; the judge may think that you made the transfer simply to protect assets from the creditor, and may invalidate the transfer. I think it is rather unlikely that the creditor would ever challenge the transfer; however, you should know that this is a possibility. You need to discuss transferring the deed with your attorney to find out if he thinks it is a viable option to protect your and your son’s property, and what other possible solutions he recommends in your situation. For example, he may recommend that you place your money in a bank account in your son’s name only to prevent the creditor from freezing the money in your bank account, which is a common way that creditors try to enforce judgments. To learn more about Alabama’s laws regarding judgments and their enforcement, read the Alabama Collection Laws page.
As I said before, I think it very unlikely this creditor would actually try to seize your home to enforce its judgment against you. In the years I have worked with people struggling with debt, I have never seen a credit card company seize a consumer’s primary residence for payment of its debt. However, you should discuss the matter with an attorney in Alabama who can brief you on your state’s laws and help you decide how to best protect yourself from the creditor’s efforts to collect. I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.