Ask the Expert: Can credit card debt put a lien on your home?
Over the last little while, I have accumulated a lot of credit card debt and now, unfortunately, I’m in over my head. I’m trying my best to make payments, it is a real struggle and I’m getting more and more worried. My debt has now gone to a collection agency, who is threatening to put a lien on my house? Is that even possible? What can I do?
Allie N, Edmonton AB
No question that trying to keep up with debt payments is stressful. It’s especially stressful when you start receiving calls from collection agencies because the pressure grows.
As to your question about credit cards and your home. The short answer is yes, creditors are able to put a lien against your home if they get a judgement from the court. In the event that you don’t repay, technically they could take some of the proceeds on your home from a sale in order to get the money that you owe them.
While this may come as a bit of a shock, it is also a good wake-up call for you to take charge of your debt before it becomes too late. You do have options before this happens. Remember, the creditors ultimately are looking to get the money back that you owe them. Take steps to repay them, perhaps even making use of your house as part of a financial strategy, and you will no longer be living in fear of losing your home.
Here are some ideas for you to accomplish that:
How did you accumulate this debt in the first place? Did it happen because you were spending beyond your means? Would it be possible to repay your debt simply by setting up a budget and doing a debt consolidation or a debt management program that frees up your cash flow, but lets you repay your debt?
If your monthly costs are substantial and you have equity built up in your home, what about selling your home and downsizing or renting a smaller place? You can use the cash from the sale to pay off your debts and live a more modest life to stay out of debt.
Depending on your income, credit history and home equity situation, there might be the possibility of getting a smaller loan secured against your home, or refinancing your mortgage to include your debt. Be careful with this particular option though as you need to be very careful with sticking to a strict budget going forward. You are tapping into the equity of your home to pay down debt and free up cash flow to cover your expenses in cash going forward. If you rack credit back up again after you’ve already taken equity out of your home, you will have substantial debt and little to no equity in your home, which will really put your homeownership in jeopardy.
Given the many different options here, it is a good idea to seek support from a trained financial professional that you trust who can help you sort through the options to find the one that provides the best solution.
Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and President of the Credit Association of Greater Toronto (CAGT).
If you have a question about a debt management program or just about finance in general, Jeff is here to help. Send us an email with your question to [email protected]. You’ll get the expert advice you need and your question may be featured here on our website.