Particular types of creditors can place liens on your property if you are not able to settle your debts. Even when debts are not attached to a property, creditors can send delinquent accounts to a collection agency. Debt collectors may sue you personally and secure previously unsecured loans by putting a lien on your property’s title. In California, the house you live in, or homestead, is shielded from these types of levies.
Property Lien Filing
A collection agency must get a court ruling to file a lien on property. Once a collector gets a court ruling, it requests that the court issue an”Abstract of Judgment.” The company files the abstract at the property records, or recorder’s, office, in the county that your property is situated. After levying a lien on your home, the collector may proceed as far as to waive the property to recoup payment for the debt.
Encumbered Property Title
A lien”encumbers” a property property title, preventing you from transferring a clear title to a new owner, or purchaser. Selling or transferring homeownership won’t get rid of the liennonetheless, a lien makes selling your home more difficult. Buyers and purchaser’s creditors ask that you pay off your liens before they buy or finance a home loan to the property. If you pay off your debt, the collection agency can discharge the lien.
Protection Through Homestead Exemption
The California homestead exemption protects the home you live in from seizure by debt collectors, with certain limitations. Additionally, it protects the equity on your home when you’re forced to sell it to pay off debts. The statute is automatic in case you need to protect your house in a bankruptcy. You do need to submit the homestead statement to protect your house from court-ordered liens. If creditors force you to sell your home, the homestead exemption limits the numbers they can receive from the profits. By way of example, as of the time of book it exempts $75,000 of one homeowner’s equity. Living agreement, marital status, age, disability, and income affect exemption amounts.
Collection agencies are more likely to levy and foreclose on a home if it’s substantial equity. Liens vary in cover off priority; therefore, exceptional, or initial liens, must be paid off prior to poor or junior liens. By way of example, your home’s mortgage has to be repaid prior to a collector can get sale proceeds. Foreclosure is an expensive process for a collection agency to execute, therefore, it’s unlikely, unless the collector is certain it can recoup the foreclosure costs and the debt owed.