Losing My House to Creditors

Q: Can my credit card companies can put a lien against my house even though it’s co-owned with my wife. How can I get out of debt without my creditors touching the house? Can I declare bankruptcy or can I quitclaim the house to my wife?
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The mortgage on the house is in my name and the deed is in both our names. The debt I owe is around $50,000. I’ve really put myself in a hole financially over the years, and I cannot afford the $900 per month payments.

A: Unless your credit card is tied into your house by means of a home equity line of credit or the like, a credit card company can’t just put a lien on your home if you owe them money.

If you fail to pay the debt you owe the credit card company, it can sue you for the amount that is due. If the company obtains a judgment against you, it can place a lien on interest in your home.

What can you do to lower your payments? You’re probably paying more than 20 percent interest on the amount you owe the credit card companies. If your credit is still good and your credit score is high enough (because you’ve been paying at least the minimum on time each month), you might be able to use some of your home equity to pay down, or off, your credit card debts. That would reduce the interest rate on the amount you owe, as well as reducing your monthly payments.

If you can’t refinance the debt or don’t have any equity to do so, you may wish to contact a credit counseling service, such as the Consumer Credit Counseling Service, to have a free budgeting session to discuss your options.

While you can file for bankruptcy, bankruptcy will ruin your credit score and may have other unintended consequences. You are married and have a home. Even if you’re allowed to keep the home after your bankruptcy filing is discharged, your poor credit score may affect your ability to obtain car, life and home insurance or may cause your rates to increase dramatically.

It may affect your ability to set up any new phone or cable service accounts. In some circumstances, you may have to sell your home to dig yourself out of your situation.

Your first step should be to try to reduce the interest rate you’re paying on your credit card debt. If you can do that, you should do all you can to tighten your belt, pay as much possible towards your debt and bring your financial situation under control – even if it means getting a second job for awhile.

If you decide to file for bankruptcy, you may want to meet with an attorney that specialized in bankruptcies to determine your course of action and the effect bankruptcy will have on your life.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com