Can a Credit Card Company Take Your House?

Life can throw you for a loop, and when a hardship hits, it's easy to get behind on debt payments. And when money is tight, debt usually takes a back seat to keeping a roof over your head and the lights on. You may need to pause payments to your credit cards.

If you miss payments, the credit card company will try to collect what you owe. When collection is unsuccessful for months on end, your creditors could escalate to a debt lawsuit. Losing a debt lawsuit can have a lot of unpleasant consequences, including wage garnishment.

Could your house also be at risk? It's natural to wonder if a creditor can take your house to recover your unpaid credit card debts. We'll break it down, and share some strategies for how to get debt relief before your home is on the line. 

Sued for Credit Card Debt: What Happens Next?

A debt lawsuit can happen when a creditor has failed in its attempts to get you to pay what you owe. Credit card debt lawsuits are filed in civil court, and you must be notified. This gives you a chance to file a response to the court summons and defend yourself against the claim. 

If the creditor wins the case, the court will issue a judgement against you. This could unlock a variety of tools the creditor can use to try to collect money from you. State laws typically allow one or both of these options:

• Bank account garnishment. Bank account garnishment or levy means the court directs your bank to release money from your account to your creditor to satisfy the debt. Federal and state laws protect some types of deposits (such as Social Security benefits) from garnishment. 

• Wage garnishment. Wage garnishment also requires a court order, and it directs your employer to withhold some of your pay and turn it over directly to your creditor. Federal law puts a cap on how much of your wages can be garnished for debts. 

Creditors have one more option to collect debts: a lien. In some cases, a creditor could put a lien against your home or other property you own—a lien is a claim to a property that must be cleared before the property can be sold. 

Can a Credit Card Company Take Your House?

A credit card company can't take your house outright if you have unpaid debts, but a creditor could put a lien on the home if they win a debt lawsuit against you. To remove the lien, you have to pay the debt. You can't refinance your mortgage or sell the property without paying off the credit card company first. 

Creditors could try to force the sale of your home for debt in certain states. To do that, the creditor has to ask the court for permission to sell your home, which is essentially a foreclosure. That's rare, however, and states have homestead exemptions that protect part or all of your home equity from court judgments. 

The statute of limitations on credit card debt dictates how long a creditor can successfully sue you for unpaid balances. Once the statute of limitations expires, your debt would be considered "time-barred,” so you should be safe from garnishments, liens, or forced sales. However, the debt itself doesn't go away, and you're still legally responsible for it. 

So, to recap:

• Can a credit card company take your home? 

Not directly, but they could put a lien on your property to force you to pay. 

• Can a credit card company put a lien on your home at any time?

No. They have to win a debt lawsuit against you and file a request for a lien with the court. 

• Can you get rid of a lien without paying the debt? 

No. You have to clear the debt to get the lien lifted, unless you file bankruptcy to cancel the debt.

Can Debt Relief Remove a Lien?

Some types of debt relief could help remove a lien if your creditor agrees to lift it. Most commonly, you might negotiate a debt settlement with your creditors that includes an agreement to lift the lien.

Your best bet is to use debt relief before your debts reach the courtroom and avoid the lien altogether. Popular types of debt relief include:

• Debt management plan: A DMP is a structured plan to pay off debt that you set up with the help of a credit counselor. Debt management plans usually take three to five years to complete. Your credit counselor may also help you get fees or interest rates reduced.

• Debt consolidation: Debt consolidation is when you take out a new loan and use it to pay off credit cards and other debts, ideally at a lower interest rate. You then make one payment to the loan each month until it's paid off.

• Debt settlement: Debt settlement means negotiating with creditors to get rid of your debt for less than you owe. Your creditor gets a reduced amount, and forgives the rest of the debt. You can settle debts yourself, or get negotiating help from a professional debt settlement company. 

• Bankruptcy: Bankruptcy is a legal option to deal with overwhelming debt. If you qualify, Chapter 7 bankruptcy could discharge your unsecured debts, though you may have to sell some assets. Consult a bankruptcy attorney licensed to practice in your state. 

What happens to a lien if your creditor agrees to debt relief? The creditor asks the court for a lien release, which is filed with your county recorder's office. This makes it official that the creditor no longer has a legal claim on your home. The judgment remains in place, but should no longer show up on credit reports or affect your credit score.

Talk to a Debt Expert

Credit card companies can't take your house directly, but it's not entirely out of danger if you're carrying a lot of unpaid credit card debt. The best way to protect your home is to be proactive. You have the ability to do something about your debt, no matter how overwhelming the situation seems.