Question: I was having a very hard time keeping up with the payments on a couple of credit cards — Visa and MasterCard — so eventually I defaulted. They sent the accounts to a collection bureau and have even threatened a lawsuit. I own my home jointly with my wife by the entirety. She has nothing to do with the credit cards — they’re in my name. If the card companies were to get a legal judgment against me, could they attach a lien to our property?
Ric: No, they cannot put a lien on your real estate. Interest rates on credit cards are high because the card issuers have no collateral when they lend you money; they can’t seize your real estate or any other assets.
(Interest rates on car loans are much lower because they can repossess the automobile if you don’t make the payments. Mortgage interest rates are even lower, because homes don’t decline in value as cars do — and, unlike cars, your house can’t easily be moved or hidden!)
The card companies are creditors, which means that upon your death they could convince the probate court to give your assets to them to pay off the debt you owe before your assets are given to your heirs. If you are not able to pay your bills, talk with a credit counseling organization such as the National Foundation for Credit Counseling — NFCC.org.
If you do have assets, refusing to pay creditors is not ethical. You borrowed the money in good faith, and in good faith you should repay it. If you’re struggling because of income loss, medical problems or other legitimate issues, talk with the creditor. They are often willing to create a payment plan for you. NFCC can help too.
Be aware that some credit counseling organizations are fraudulent, exploiting people’s problems for their own benefit. Never pay in advance for credit-counseling services or believe that anyone can make your debt go away; nobody can instantly repair your credit record. But a legitimate organization such as the NFCC can be of real assistance to you. You can also get expert advice on credit and debt management from a bankruptcy attorney or a reputable debt counselor.
Meanwhile, don’t fret that the card issuers will take your house. They can’t.