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.

By , Attorney

If a creditor sues you in court for a sum of money and you lose the case, the creditor will get a money judgment. That creditor may then obtain a judgment lien, which is a lien that attaches to your real estate, usually by filing a copy of the judgment in the county records.Though, sometimes a lien is created automatically when the court enters the judgment. This process converts the judgment from an unsecured debt to secured debt.

And, in some cases, the judgment creditor can force the sale of your property to get paid.

How a Judgment Creditor Typically Gets Paid

Generally, a judgment creditor with a lien gets paid when the debtor sells or refinances the home. But 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.

So, if you have enough equity in your home, a judgment creditor might be able to force the sale of the property to collect on the judgment. However, the creditor can't do this if the property is exempt due to a homestead exemption.

What Is a Homestead Exemption?

Each state allows specific types of property to be exempt from creditors, including judgment creditors. A "homestead exemption" protects a certain dollar amount of the equity in a debtor's homestead from judgment creditors.

For example, in California, as of January 1, 2022, the amount of the homestead exemption is the greater of the following:

  • the countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($626,400) or
  • three hundred thousand dollars ($313,200).

The amounts are adjusted annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations. (Cal. Civ. Code. § 704.730).

So, in California, $313,200 to $626,400 of a home's equity, depending on the median sales of homes in the county where the property is located, can't be touched by judgment creditors. But as is typical, those who use their homes as collateral for loans aren't protected; the lender has the right to foreclose, and the borrower won't qualify for the 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 can't be larger than half an acre in a municipality or 160 acres elsewhere. (Art. X, § 4 of the Florida Constitution). If the homestead is on a lot that exceeds the half-acre or the 160-acre size limitations, then the homestead protection is allocated pro-rata to the total property value.

Some states require that the debtor record a homestead declaration before the exemption is available.

Will a Judgment Creditor Come After My Property?

Usually, it's not worth the judgment creditor's time and effort to force a sale of your home because the creditor would have to pay off any previously recorded liens, like mortgages, that are on the property. Plus, the judgment creditor must consider that the homeowner could be entitled to a homestead exemption.

So, for a forced sale to make sense, you'd have to have enough equity in the property to cover any mortgages, any homestead exemption, other prior liens, foreclosure costs, as well as enough left over to pay off the judgment.

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