While credit card creditors are normally unsecured ones, they may seek to gain a security interest in a debtor’s property by filing a civil lawsuit. In the event a judgment is obtained, the creditor may then attempt to enforce the judgment by garnishing wages, levying bank accounts or placing liens against property for the judgment amount.
Most people have mortgages on their homes, and the mortgage holder will have a senior interest in the property. When that is the case, the credit card creditor may determine that placing a judgment lien on the property may not be financially worthwhile. However, in some cases, judgment creditors will seek a property lien against the judgment debtor’s home or other property.
A judgment creditor who has a lien on the property may then seek to enforce it by forcing the sale of the home in order to recoup the outstanding balance. Even if they do not choose to sell the home, they may still be able to prevent the person from selling their property due to the lien’s encumbrance on the home. Judgments are only good for a specified number of years, but a judgment creditor can simply request that the judgment be renewed for an additional period of time.
People with significant and unmanageable debt may wish to avoid a credit card lawsuit or to stop one that has already been filed against them. If a debtor files a Chapter 7 bankruptcy petition, an automatic stop on further collection activities goes into effect until the estate is closed and the unsecured debts are discharged. The creditor may then not be able to make further attempts to collect on the unsecured debt. Other ways in which people may be able to avoid such lawsuits is by attempting to negotiate settlements prior to a lawsuit being filed.
Source: SF Gate, “Can Unsecured Creditors Collect Their Debt from the Sale of My Home?“, Ciele Edwards, December 12, 2014