Find An Agent

Can Credit Card Companies Put a Lien on Your Home?

Having a lien on your home can be a huge obstacle if you ever want to sell or buy a home. Learn what happens if you have a lien on your home and what you can do to remove it from your record.
Having a lien on your home can be a huge obstacle if you ever want to sell or buy a home. Learn what happens if you have a lien on your home and what you can do to remove it from your record.

Wouldn’t it be nice if, before you ever buy a house, there’s a huge flashing red sign over the door that tells you any issues with the home? Unfortunately, this isn’t the case — understandably, as not to mention that would be a huge electric bill each month.

But because problems with a home aren’t always transparent, buyers need to do their homework and dig deep before purchasing a home.

While issues with a home can include physical damage, you may also run into financial obstacles if, for instance, there’s a lien against the home.

If you find there’s a lien against the home or if one is placed on your home while you’re living there, it can make the buying and selling process more complicated.

What Does Having a Lien on Your Home Mean?

A lien is a legal claim against your property. Liens are commonly used by creditors and debt collectors as a way of ensuring security, so you will repay your debt because if you do not pay, they can then seize your home as repayment.

Liens are public record advertising to the world that you owe someone money and will show up on your title making your home less desirable and more difficult to sell.

A lien can prove detrimental if you ever want to sell your home. Most buyers won’t even consider buying a home if there’s a lien against it as they typically rely on financing to purchase a home, and most lenders won’t go near a home with a murky title and lien as it’s too risky an investment.

Creditors use this to their advantage because sellers will then be forced to pay off their debt to close a sale. Usually, sellers will use the proceeds from the home sale to satisfy any debts.

If you have a lien against your home, you’ll want to satisfy your lien and clear your title removing it from public record as soon as possible — not only can a lien can impact your ability to sell, but your credit score, your refinancing options, and your ability to apply for credit cards or loans.

Liens can show up in all forms though several more common forms are construction liens, when a contractors work on your home and you don’t pay, and tax liens, if, for instance, you haven’t paid taxes, the IRS or your local government can put a lien on your home to collect.

Another common lien is from creditors — e.g. your credit card company. However, credit card companies must go through a few more hoops than the IRS or lenders to put a lien against your home.

What Happens When a Credit Card Company Puts a Lien on Your Home?

If your credit card company puts a lien on your home, you’ll get a fair warning well in advance that the company is making a move. First you’ll get a warning letter saying you need to pay your credit card bill or they will pursue legal action.

Not to worry, the credit card company won’t opt to put a lien on your home for just a few missed payments. Rather, if you’ve gone for months without paying your bill and maintain an excessively high balance, only then will the credit card company take the next steps.

Once you receive a warning letter from your credit card company, negotiate a payment plan and settle your debt now. Later, when the courts are involved, it becomes a much more difficult process.

However, if the credit card company decides to move forward, they will have to sue you and win a court judgement. The credit card company is required to inform you of this lawsuit and will serve you papers. More often than not, debtors ignore the summons.

Because most don’t show up in court to fight against the creditors, the credit card company will be awarded a default judgement and can put a lien against your home.

While a lien from creditors puts a blemish on your record, you shouldn’t worry you will lose your home.

Technically, creditors have the power to foreclose on your home and seize it as payment, however, credit card companies rarely do so as it’s not in their best interest.

If a home forecloses, creditors are last in line to collect. Between mortgage lenders and tax debts, there’s usually little left to cover any credit debt.

How Do You Remove a Lien?

Again, you’ll want to remove a lien as soon as possible, so you have the freedom to sell your home, seek mortgage loans if you ever buy a new home, and be able to apply for credit cards. Because even if you remove a lien, the blemish remains on your credit history for seven more years.

The most straightforward way to remove a lien is to pay the debt outright. However, this may not be a plausible option for many already on a tight budget. You can try to negotiate with your creditors.

Many times, if you’re able to pay a decent sum of the debt immediately, credit card companies may settle and remove the lien from your home.

Another option is to wait it out. The lien is only valid for the length of the judgement — creditors have a certain time limit to collect which can be 10 years or shorter or longer depending on where you live.

However, in some instances, creditors can continuously renew the judgement making the lien against your home indefinite until you pay back the debt.

But once you remove the lien, make sure the lien release is notarized and filed with the county so it can officially be cleared from your public record.

Partner with an Experienced Real Estate Agent

Whether you’re buying or selling, a lien can make the entire process more stressful and complicated. With a Clever Partner Agent, they will help you do a title search on homes you’re interested in to make sure there are no surprise liens against the home.

And if you want to sell with a lien on your home, a Partner Agent will work to get you a great price for your home so when you sell, you can pay off the lien in its entirety and still have some cash leftover.

You’ll find even more cost savings working with a Partner Agent as they work for a flat fee commission of $3,000 or 1% if the home sells over $350,000 and as a buyer, you’re eligible for the Home Buyer Rebate to receive $1,000 on homes over $150,000.

Get in touch with Clever to learn more and connect with an experienced Partner Agent.

 

SHARE

Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

See all Andrew's Posts
WHAT'S NEXT

Find Your Dream Home With A Top Agent And Save Thousands

Learn how you could save thousands when you buy a home with Clever!