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Got Bad Credit Card Debt? Read This Before Selling Your Home

Many people believe that if you become delinquent on your credit card debt, the only thing in jeopardy is your credit. Unfortunately, it could jeopardize your ability to sell your home.

During these tough economic times, each month many families are faced with tough decisions about which bills to pay and which to let side.

More than likely, electric, water, food and mortgage payments are at the top of that priority list. Credit card bills often rate lower.  

But before you let those high balance credit card bills go, you should know that once you go beyond 90 days, a credit card company may take steps to try to recover its money, including obtaining a judgment for the debt.

Once the court issues a judgment, the creditor can take steps to get its money. For those selling their homes, this is especially important since that judgment can be re-filed as a "certified judgment," which means the credit company can come after real property, according to Drew Johnston, a licensed title agent with Sunbelt Title.

Under Florida law, a homesteaded residence is protected from this type of certified judgment, according to Brian Ross, Florida attorney and West Park Village resident.

But there's a twist.

When a property sells, the title company is required to provide a clear title, which means there are no outstanding liens, judgments or claims by others to that property. In order to do that, the title company will determine whether they feel there is risk that your creditors will make a claim against the property for the outstanding debt after closing.

Ross also notes that “even though a seller may be willing to sign an affidavit confirming the homestead status on the property, the title company may not be willing to take the risk of it being challenged after closing.” 

Also important to note: If the home is in short sale or bank foreclosure and the owner has moved, there could be an argument that the owner has abandoned their homestead.

It's a situation that makes title companies leery.

The bottom line is outstanding judgments against you will make title companies leery, which could make it quite difficult to find a title company willing to take the risk to insure the title for a new buyer — something you'll need if you are to successfully sell your home.

You're better off being honest about your financial situation with the creditor and agreeing to a payment plan so the creditor doesn’t proceed down this road. 

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