Facts About Debt Collectors and Property Liens
There are a number of things that debt collectors can do to collect your balance if your credit account is forwarded to a collection agency. The first thing they do is make a series of phone calls. In conjunction with the calls, you will probably receive some past due notices that will provide all of the information about your account. If these don't work, debt collectors can use more forceful techniques.
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Judgment
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A collection agency can start legal action against you and receive a judgment. Once the agency has a judgment, they can file a lien on your property, though whether they can do so will vary from state to state.
Home Sale
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Property liens are not immediately collectible. If the home is sold, any liens or mortgages must be paid off from the proceeds of the sale.
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Refinance
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When a borrower decides to refinance his loan, the lien must be paid off from the equity in the home. The lien will be listed on the disclosure statement as one of the items to be paid. A check will be issued and made payable to the lien holder.
Lien Release
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Once a lien is paid off, a release must be sent to the court clerk for filing. It is the debtor's responsibility to make sure this is done.
Foreclosure
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A debt collector can start a foreclosure proceeding and force the sale of your home. This is cumbersome, time-consuming and costly for the creditor, so it is rarely done. Some states will allow a debtor a homestead exemption for a certain amount.
Bankruptcy
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When a debt collector starts legal action, including foreclosure, the debtor can have it stopped by filing a petition for protection through bankruptcy.
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