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.
Yes, you can be sued for credit card debt. Luckily, there are many ways to resolve it. Consumer rights attorney and CEO of Debtbrief, Greg Anjewierden, joins this week's webinar where we discuss the ins and outs of being sued for credit card debt, how to respond, and how to resolve the lawsuit through debt settlement.
After priority claims, the second items to be addressed are secured debts. These are also known as liens. When a debt is secured, it means that the person or entity that you owe money to has the right to keep or take your property until the debt is either paid or discharged.
While credit card companies technically have the ability to pursue your home for unpaid debt, it's rare. A debt collector must go to court and get a judgment before it can place a lien on your home. There are limits and exemptions to how much of your home's equity a debt collector can claim.
If you owe money for most other debts like credit cards and medical bills, you (usually) did not sign a security agreement. So, the creditors cannot seize your home to pay the debt. But, if you want to sell your home and creditors have filed judgments for unpaid debts, you may need to pay those debts before the sale.
A judgment lien can be placed after a creditor wins a lawsuit, and this can occur without direct notice to the property owner. Hidden liens are especially problematic as they are often discovered only when a property title search is conducted during refinancing or sale.
Liens are legal claims against property by creditors that allow them to collect what they're owed. Liens can be general or specific, and voluntary or involuntary. If a homeowner doesn't settle an obligation, then the lienholder may legally seize and dispose of the property.
Judgment and most statutory liens have a negative impact on your credit score and report, which affect your ability to obtain financing in the future. Consensual liens (that are repaid) won't adversely affect your credit, while judgment and (most) statutory liens have a negative impact on your credit score and report.
Filing fees and other related costs
The cost of filing this document can range from $5 to $20. If the lien is a mortgage lien, you may have to pay a reconveyance fee to the lender to release the lien. This fee can range from $100 to $300.
Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.
After several months of non-payment, creditors may charge off your debt and sell it to a third-party collection agency. This can lead to more aggressive attempts to recover the money as well as damage to your credit score. In some cases, creditors or collectors may take legal steps to compel you to pay.
The bottom line. While debt collectors may not automatically sue over a $3,000 credit card debt, they have the right to pursue legal action if they believe it's a viable option.
In California, a judgment lien on real property lasts for ten years. This means that if a court has ruled in favor of a creditor and placed a lien on your property due to unpaid debts, that lien will remain for a decade.
Debt collectors can only take money from your paycheck, bank account, or benefits—which is called garnishment—if they have already sued you and a court entered a judgment against you for the amount of money you owe.
Fortunately, your home is safe from any creditors who do not have a mortgage or lien on it. Credit card companies and other unsecured loan holders can't come and simply take your property or home after missing a few payments.
A tax lien is a legal claim against assets such as your house or other personal property for unpaid taxes. A tax lien has a large negative effect on your credit score. A tax lien remains on your credit report for ten years if it's unpaid and for seven years if it's paid and released.
Once you repay the debt, have your lender sign a lien release document giving up their claim on your property. File the signed release form at your local county recorder's office to remove the lien against your property.
Once you have paid the lien amount in full, request a letter from the state tax agency stating that you have satisfied the debt. You'll need to send this paperwork to the credit bureaus. The process for obtaining this release form varies by state. Dispute the lien with the credit bureaus and request that it be removed.
Given that filing a lien can take a lawyer a number of hours, from researching the case to sending the notice of intent to lien and filing the lien itself, you could be looking at a total cost ranging from $1,000 to $2,500 for one lien.
Pay Off the Lien – Once you determine that the lien is valid, the simplest method for removing it is to pay it off. Even if you need to borrow the funds from family or friends, satisfying your debt will allow the property to become unencumbered, sold, and closed.
Can a bank take property that is paid off? Yes, but it's unlikely. Some reasons are fraud, chain of title issues, existing liens that were never released.
The most drastic method of removing this type of lien from your property is to take it to court. If the court rules in the homeowner's favor, the lien can be ordered to be stricken from the property record. It's recommended to get a lien waiver signed by the contractors to prevent legal action.
Bank Liens
Previous mortgages are the most common kind of bank lien and receive high priority. If your prospective property has been sold before, the old mortgage should show as paid on the title records.