Can Creditors Force You to Sell Your Home to Pay Credit Card Debt?
Credit card debt is a form of unsecured debt, meaning the creditor has no real property to seize as collateral in the event you don't pay. A credit card company may pursue your real property, including your home, indirectly through litigation, but cannot force you to simply sell your home to collect the profits.
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Credit Lien
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A credit card company can petition the court to obtain a judgment against the equity available in your home. If successful, the judgment places a lien against the equity available in your property, which entitles the credit card company to a portion of the proceeds when the home is sold. Essentially, the lien guarantees the credit card company will eventually be paid in full for the debt owed. You may be able to remove the lien on your home if you make arrangements to pay the debt that meet your creditor's approval.
Involuntary Bankruptcy
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If you have available credit in your home and are refusing to make payments on your unsecured debts, your creditors may be able to force you into Chapter 7 bankruptcy. According to Title 11, Chapter 3 of the United States Bankruptcy Code, a creditor may file a petition to force you into bankruptcy if you refuse to pay your debts and the creditor believes sufficient finances or assets exist to pay them. A Chapter 7 liquidation could cost you your home as the court seizes your assets to liquidate them and pay off your creditors including your credit cards.
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Fair Debt Collection Practices Act
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The Fair Debt Collection Practices Act governs the procedures creditors are required to follow in collecting debts from consumers. If a credit card company or collection agency acting on the creditor's behalf threatens you with litigation it may be violating the regulations of this act. It is illegal for a creditor to insinuate the paperwork sent you is legal paperwork or the product of a lawsuit against you if it is not. It is also illegal for a creditor or a collection agency representing a creditor to mail you documentation that appears as if it came from a court or government office if it did not.
Keeping Your Home
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If your credit card debts are only a small portion of a greater financial difficulty, bankruptcy may be a means for you to prevent the loss of your home and pay your creditors. Chapter 13 bankruptcy allows you to retain possession of your real property, including your home, while you make payments in accordance with a court-approved debt management plan. Once you successfully complete the plan, your remaining unsecured debts including your credit card debts, are expunged by the court.
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