Can a judgment creditor foreclose on my home?
Judgment creditors can force the sale of your home to get paid, but they rarely do this.
If you are sued in court for a sum of money and lose the case, the prevailing party will be granted a judgment. That party may then obtain a judgment lien, which is a lien that attaches to your real estate. In some cases, the judgment creditor can force the sale of your property in order to get paid.
(Find more articles about property and judgment liens.)
How Judgment Liens Attach to Real Estate
The judgment lien is created when a copy of the judgment is recorded in the county land records or, in some states, it is created automatically when the court enters the judgment. This converts the judgment from an unsecured debt to a secured debt. (To learn more about judgment liens, see our article What is a Judgment Lien?)
How the Judgment Creditor Gets Paid
Generally, the creditor will be paid when the debtor sells or refinances the home. However, if the creditor chooses not to wait for a sale or refinance, the creditor can execute on the lien by asking a court for permission to sell the debtor’s real estate. This means that if there is enough equity in the house, the judgment creditor may be able to force the sale of the house to collect on the judgment. However, if the property is exempt due to a homestead exemption, the creditor cannot do this.
The Homestead Exemption
Each state allows certain property to be exempt from creditors, including judgment creditors. The homestead exemption protects a certain dollar amount of the equity in a debtor’s homestead from judgment creditors.
In California, for instance, a homestead exemption is available if:
- the house is the debtor’s principal dwelling
- the judgment debtor, or spouse, resided at the dwelling on the date the judgment creditor's lien attached to the dwelling and
- the judgment debtor or spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead.
In California, an unmarried individual under age 65 with no dependents or disabilities is entitled to an exemption of $75,000.
Example. If the homestead exemption is $75,000 and the debtor’s home is valued at $175,000, but there is a mortgage on the property for $100,000, then the home is exempt from seizure. This is because the debtor has $75,000 in equity but there is a $75,000 exemption.
Florida, as another example, has a very generous homestead exemption. In that state, the homestead exemption provides no limit to the value of certain real property that can be protected from creditors. However, the property cannot be larger than half an acre in a municipality or 160 acres elsewhere.
Some states require that the debtor record a homestead declaration before the exemption is available.
(To find the homestead exemption amounts and whether a homestead declaration is needed in your state, see our Homestead Exemption topic page.)
Will a Judgment Creditor Come After My Property?
Usually, it is not worth the judgment creditor's effort to try to sell your property since the creditor would have to pay off any previously recorded liens, like mortgages, that are on the property. Plus, the judgment creditor must take into account the fact that the homeowner may be entitled to a homestead exemption.
This means that in order for a forced sale to make sense, there would have to be enough equity in the property to cover the mortgages, any homestead exemption, other prior liens, foreclosure costs, as well as enough left over to pay off the judgment.