Liens and credit card debt: What you need to know

Financial hardships happen, and when they do, it can be hard to keep up with the bills. For example, you might fall behind on credit card payments because you're focused on keeping a roof over your head and feeding your family. That's a tough choice that many people have to make. 

When credit card debt goes unpaid, the credit card company typically gives you a chance to get caught up. If collection efforts don’t pan out, a debt lawsuit could follow. 

Should a creditor sue you and win, they could go one step further and put a lien on your property. A lien is a legal claim to property that creditors can use to get you to pay what you owe. 

Here's what you should know about liens and credit card debt. 

The information provided in this article is intended for general informational purposes only and shouldn't be taken as legal advice. For personalized legal advice, consult with a qualified attorney licensed to practice law in your state.

Can a lien be placed on your property for unpaid credit card debt?

Credit cards are a type of unsecured debt, which means there's no collateral tied to it. Collateral is something of value you own, like a bank account or a car. 

When credit card debt goes unpaid, the credit card company has a legal right to try to get you to pay. They can exercise that right through a lawsuit. If the court rules in the creditor's favor and issues a judgment against you, that could open you up to other consequences. 

State law determines what a creditor can do next to get you to pay. The options might include:

• Wage garnishment

• Bank account levy 

• Liens

A lien prevents you from selling your property until the debt is paid off. 

Liens are normal in many situations. For example, your mortgage lender has a lien on your home until you finish paying off your mortgage. If you sell the home, your mortgage balance will be paid off before you get any of the money from the sale.

So, could creditors put a lien on your property for unpaid credit card debt? Yes, if they get a judgment lien. 

A judgment lien doesn't take your property. It requires you to pay the debt you owe before you can sell the property. Credit card companies can attach judgment liens to:

• Your home

• Land that you own

• Cars or other vehicles you own

Judgment liens don't show up on your credit reports and won't affect your credit scores. Even so, they're public records, so anyone can see them.

How does a credit card judgment lien work?

Credit card companies have to go through the courts to get a judgment lien against a debtor. They first have to bring a debt lawsuit against you and win their case. Judgment liens are nonconsensual, which means you don't have to agree to them. 

Once a lien is in place, it generally stays in effect until you:

• Work out a payment agreement with the creditor

• Sell the property (which forces payment of the debt)

• Reach the judgment expiration date for your state

States decide how long a lien can be enforced. In California, for example, judgments remain in effect for 10 years. That gives the credit card company a long window of time to collect what you owe. 

Expiration doesn't always mean the lien goes away. States can allow creditors to renew or extend the lien period. Using California as an example again, the creditor could renew liens for another 10 years. 

What are the consequences of a lien from unpaid credit card debt? 

Liens can be problematic for a few reasons. Here are some of the main drawbacks to know. 

• Your credit scores aren't affected, but your ability to get credit could be if a lender decides to check public records for judgments. 

• A lien could limit your financial options if you need to get a loan in an emergency or for a major expense. 

• It could be more difficult to refinance your mortgage or get a home equity line of credit (HELOC) if a creditor has attached a judgment lien to your home. 

Creditors can still take other collection actions. Your bank account or wages could still be garnished even if the creditor puts a lien on your property. 

How to remove or deal with a credit card debt lien

When a creditor puts a lien on your property for credit card debt, don’t panic. You have options for dealing with it. You just need to know what they are. 

• Pay in full. The fastest way to get rid of a credit card debt lien is to pay the judgment amount. If that's not realistic, you'll have to consider another route. 

• Resolve the debt. When you resolve debt, you negotiate with your creditor to settle the debt for less than what's owed. A creditor may be open to that if you can't pay in full and/or it's unlikely that you'll sell the property the lien is attached to any time soon. It’s harder to negotiate a debt after a judgment is issued and a lien is in place. If you’re worried about a judgment lien, open up the lines of communication with your creditor sooner rather than later.

• Dispute the lien. If you believe the debt doesn't belong to you or that the credit card company obtained a judgment lien improperly, you could dispute it. You'll need to follow your state's guidelines to dispute a lien, which usually involve the courts. You'll also need to offer proof to show that either the debt isn't yours or that the lien shouldn't have been granted for a different reason. 

You could also try to remove a judgment lien through Chapter 7 bankruptcy. Chapter 7 bankruptcy discharges (eliminates) certain debts. In exchange, you may have to give up some of your property or assets.

Bankruptcy could be a way to deal with liens that are tied to exempt property. Exempt property is anything the court can't force you to turn over to pay creditors. Exemptions depend on where you live. A chat with a bankruptcy attorney could shed light on whether Chapter 7 makes sense for your situation. 

How to prevent a lien from credit card debt

The best way to prevent a credit card debt lien is to be proactive. If you've fallen behind on credit card payments, talk to your creditors. They may be able to offer you a financial hardship plan to give you time to get back on solid ground. 

If that's not an option, you could look for other solutions. 

• Debt management plans (DMPs) let you make one monthly payment to a creditor counselor. Your credit counselor then pays your creditors. You'll likely need to stop using your credit cards, but you may be able to get a break on the interest rate or fees. 

• Debt consolidation lets you combine credit card debts using a personal loan or home equity loan. That leaves you with fewer debt payments to make and could reduce the interest you pay.

• Debt relief lets you get rid of credit card debts for less than what you owe. Your creditors don't have to agree to negotiate with you, but they might do so to avoid the time and cost of a credit card debt lawsuit. 

If you ignore a debt lawsuit and do nothing, that virtually guarantees the creditor will win their case, which could lead to a lien. Even if it feels scary, you can take steps to protect your rights and finances. 

The most important thing is to take action if a creditor sues you. Send a debt validation letter to make sure the debt belongs to you, submit an answer to the credit card lawsuit summons, and get guidance from a qualified legal professional.