If you own a home, and have fallen behind on your credit cards or other unsecured debts you may be worried about what these creditors can do to collect on the debt. In many states, including California, unsecured creditors can become secured creditors and place a lien on your home.
HOW CAN AN UNSECURED CREDITOR PUT A LIEN ON MY HOME?
The process in California, and in many states, requires that the unsecured creditor file a lawsuit against you for the debt. The creditor cannot simply go and record a lien on your property for the debt owed. The following are the steps that a creditor must take to turn an unsecured debt into a secured judicial lien:
- File Lawsuit and Obtain Judgment-They must file a summons and complaint in state court and allow you time to respond to the lawsuit. If you fail to respond or if you lose the lawsuit and they obtain a judgment against you then they can take steps to record a lien against your property.
- Get Abstract of Judgment-Once the creditor has obtained a judgment against you they can file an additional document with the court to obtain an abstract of judgment. An abstract of judgment is a summary of a judgment that states how much is owed for the debt, including attorneys fees and interest. The abstract of judgment is necessary in order for an unsecured creditor to record a lien against real property in California.
- Record Abstract of Judgment– Once the abstract of judgment has been issued by the court clerk, the creditor can submit the original to the county recorder to obtain a lien on real property.In order for the lien to be valid against real property that you own, it must be recorded in the county in which you own the property. If the creditor records a lien in Orange County, and your property is in Riverside County, it will not become a valid lien against your property in Riverside. Creditor’s can usually call the county assessor’s and obtain information on whether you have real property located in that county. If you own more than one piece of property in that county and they record a lien in that same county, it becomes a valid lien against all real property you own in that county.
If a creditor has placed a lien on your property then the lien will continue to incur interest at the ongoing rate stated in the abstract of judgment. In addition, the lien will have to be paid off if you sell the property or refinance the property. The creditor with a lien on your home can also force the sale of your home if it has equity. The creditor does not have to wait for you to sell your home to get paid, but can request court permission to sell your home in order to satisfy the judgment. A creditor will generally only seek to do this if there is equity in your home from which they can get paid.
A credit card lien or other judgment lien can also stop you from being able to modify your mortgage. Generally mortgage companies will not approve the modification of your home mortgage without you clearing off the liens on your property.
HOW DO I KNOW IF A LIEN HAS BEEN RECORDED AGAINST MY HOME?
If you have received a notice from the county recorder that a document has been recorded on your property it is important to confirm what has been recorded. In most counties in California you can go to your local county recorder’s office and examine what has been recorded against your property. In California, if a credit card company or other creditor has recorded a lien against your property you will find an abstract of judgment recorded against your property. The abstract of judgment will look as follows but with a recording number in the top right hand corner:
How Long Can The Lien Remain on My Property?
The lien placed by the creditor is valid for 10 years in California, but can be renewed. After 10 years the creditor can apply for a renewal of the original judgment and renew the abstract. During the time the lien remains on your property, it will continue to accrue interest. For other states you need to check your state laws to determine how long judgment liens are valid for.
WHAT CAN I DO TO REMOVE A LIEN FROM MY HOME?
There are several options available if a credit card or other creditor has placed a lien on your home. In order to remove the lien you can:
- Satisfy the judgment by paying it in full, and having the credit card company release the lien
- Offer a settlement in exchange for releasing the lien from your home.
- File for bankruptcy protection and file a motion to avoid the judgment lien
When you file for bankruptcy protection the judicial lien/judgment lien will not automatically be removed. You must file a motion to avoid the lien. Talk to an experienced bankruptcy lawyer about removing any existing judgment liens in your bankruptcy case.