Liens: can I be forced to sell my property?

On credit card owed, if they take a judgment, can they make me sell my property or only have a lien in case one day I do sell my property?

Once a creditor has obtained a judgment for an unpaid debt, there are several collection methods available to the creditor, said Johns, Flaherty & Collins attorney Maureen Kinney. A creditor may garnish your paycheck or attach your checking or savings account at a bank or credit union. A creditor may also execute on the judgment, which is a legal proceeding to attach and sell property, including both real estate and personal property.

If a creditor attempts to sell property, the debtor can assert rights to certain personal exemptions, much like bankruptcy. In Wisconsin, for example, a debtor is entitled to keep up to $40,000 of equity in personal residence. Each state has different limits as to what types of property are considered exempt or for how much, said Kinney.

As a practical matter, attempting to sell the property is not often beneficial because the proceeds are applied first to prior mortgages or back taxes on the property and only then are creditors paid. Frequently the creditor ends up having to purchase the property subject to all the back liens or taxes in order to realize any gain. Consequently, the creditor may get very little or nothing once those other liens are paid.

A judgment is a lien on the debtor’s property. It is often most effective for a creditor simply to have the lien continue in existence until either the debtor sells the property or the debtor wants to borrow money and needs to clean up his credit rating and pay outstanding judgments, said Kinney. Upon sale, particularly real estate, the debtor would have to pay the judgment lien from the closing proceeds.

For more information on collection law, contact Maureen Kinney at 608-784-5678.

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