Homestead?

[safeber]

What is the name of your state?VA

Just browsing the CC debt Q&A to learn. Besides residing and owning a home in a state that has Homestead protection is it really possible for a CC vendor to be able to force sale of home for outstanding debt?

To push the issue, what I understand from these threads is that if I have a $500.00 CC balance that I elect to ignore and own a home the CC vendor can force sale if a judgement for that debt is in their favor? I had assumed all CC debt was unsecured, thus the reason for such high interest rates on many cards. I guess I don't see the logic here. If such a debt can ultimately force the sale of a home then it is in essence secured and should therefore have a much lower interest rate to reflect this reality. True??? Is there a balance threshold for this to occur...$100.00 outstanding, $1000.00 outstanding? Could a small claims court rule to attach this debt to a home?

Thanks for anyone that can follow my logic with a CC101 response.

 

[Debt Guy]

Every state has different laws. You would need to do some research on VA to get specific answers to your questions.

But, here is the general scheme.

Credit cards are unsecured debts. If you default, the creditor has the right to sue. If they sue and prevail, they are awarded a judgment. Judgments last a really long time.

Judgment creditors are allowed to do certain things in order to collect their judgment. Most states (but not all) allow the creditor to garnish wages. They can put a levy on your bank account (and wipe it out). They can attach assets.

Every state has a list of assets that are exempt from attachment. For example, in VA, you can exempt equity in your home up to $5000 plus $500 per dependent. In TX, the entire value of the property is exempt -- period. In FL the entire value is exempt if the land is less than 1/2 acre in town or 160 acres out of town. In MA, $500,000 of equity is exempt. Etc. Etc.

The same concept of exemption applies to motor vehicles, household furnishings, clothing, cash in your wallet, jewelry, etc. Again, every state is different both in terms what is exempt and the amount of the exemption. Some states allow the sheriff to auction household furnishings to satisfy judgments.

In a homestead state, a judgment creditor generally cannot force the sale of real estate. They can attach their jugment to the real estate and thus establish their priority. When you go to sell the real estate, they are in line to be paid since they have a lein on the property and you will not be able to convey a clear title until the lein is satisfied.

Like I said, every state is different and some are just downright weird. For example, TX is a homestead state and the entire value of the homestead is exempt. But, in TX, homestead is a "state of mind". When you go to sell the property, the title company does not know your "state of mind" and thus will not write a title policy to the buyer until you satisfy the judgment.

Clear as mud. Right?

 

[safeber]

Actually, it is clearer now. Just needed a few details to help understand the overall subject.

You know how it is, I had just enough knowledge before posting to be dangerous. Thanks for the Cliff Notes version...it helped greatly.

Take care