Can Creditors Force the Sale of a Home?

When a creditor's attempts to collect a debt fall short, the creditor may pursue a civil judgment to force debtors to pay up. If a creditor sues you and wins, it may be able to garnish your wages or seize money in your bank account to satisfy the judgment. Creditors can also place a judgment lien against your home. Depending on its value, the creditor may be able to force a sale to collect what's owed.

Enforcing a Judgment Lien

Once a creditor wins a judgment against you, it must take additional steps to enforce a lien against your property. The creditor must file a motion with the court for a judgment lien, along with a writ of execution. Once the court approves the judgment lien, a copy of the order must be recorded with the register of deeds or land records office in your county of residence. The creditor must contact the county sheriff's office to have the writ of execution served to the property owner. Once the writ is served, the creditor and the sheriff can choose a sale date. Typically, a forced sale takes the form of an auction open to the public.

Homestead Exemption

If you're served with a notice of a judgment lien, claiming the homestead exemption may allow you to avoid the forced sale of your property. The homestead exemption allows you to shield a specific amount of your home's equity value from creditors. If the amount of equity interest you have in your home is equal to or less than the exemption limit allowed in your state, a creditor cannot force the sale of your home. Married couples can generally claim twice the exemption limit for a home that is owned jointly. If you wish to claim the homestead exemption, you must file your claim within the time frame specified by the laws in your state.

Right of Redemption

The right of redemption allows homeowners who have lost their home through a forced sale to reestablish their ownership of the property. The laws for redemption rights vary from state to state. Generally, you have a specific period of time following the sale of your home to purchase it from the buyer. You must pay the buyer the amount he paid for the home, plus interest. If you fail to redeem your ownership of the home after a specified time frame, you lose all rights to the home.

Considerations

Forcing the sale of a home can be a lengthy and expensive process and creditors may only choose to pursue a judgment lien if other debt collection methods have failed. A creditor may place a judgment lien against your property without attempting to force its sale. However, if you choose to voluntarily sell the property or transfer its ownership, you will be responsible for paying the lien in order to complete the transaction. Filing bankruptcy can help you to eliminate creditor judgments while maintaining possession of your home. Consult a qualified bankruptcy attorney to determine if bankruptcy is the right choice for you.

References

• Michael Best & Friedrich LLP: Enforcing a Judgment Lien Against Real Estate
• Illinois Legal Aid: Judgment Liens and Enforcement of the Judgments Against Real Estate
• Fullerton Law: Attaching Judgment Lien to Real Estate
• Indiana Legal Services: Can a Creditor Take My Property?
• The Bankruptcy Site: What is a Homestead Exemption in Bankrutpcy and How Do You Qualify?