Being served with a civil lawsuit could mean the start of a protracted process that ultimately ends with the other party seizing your property and selling it. This sort of thing happens more frequently than you might know. But is every piece of property you own up for grabs? Could you lose your house as a result of civil litigation?
I have been writing about civil litigation and court judgments for a long time. One of the things I have learned over the years is to never say never. I could not unequivocally state that your house would be protected from civil litigation, but I can say the chances of losing it are slim.
Other Options Before Property
Seizing and selling property is considered an option of last resort. There are other options before getting to that level. The first is setting up a payment plan. Judgment collection experts recommend it as the starting point. If you were to lose a civil lawsuit, you or your attorney would likely be contacted with a payment plan option.
If a payment plan is not doable for whatever reason, the next two options are wage and bank account garnishment. In a wage garnishment scenario, your employer is compelled to deduct a certain amount of money from your paycheck to pay your debt.
A bank account garnishment scenario is similar. Your bank is compelled to freeze a certain portion of your funds and forward them to the creditor. Note that state laws vary in terms of how much can be garnished from wages and bank accounts. A small number of states do not allow garnishment of either type.
Judgment Liens Are Another Option
Another option for judgment creditors is the lien. A judgment lien is a lien placed on a piece of real property in order to establish the creditors financial interest in it. In simple terms, imagine a judgment lien being placed on your home.
The lien in no way suggests you are about to lose your home. All it does is give the creditor a financial interest. Should you decide to sell, a portion of the proceeds would go to the creditor in order to satisfy your debt.
When Personal Property Is Seized
When all other options fail, a creditor may choose to seize and sell personal property. Judgment Collectors, a Salt Lake City, Utah judgement collection agency, says that state laws vary in terms of the types of property eligible for seizure.
Most states allow seizing vacation properties, investment properties, boats and recreational vehicles, jewelry, collectibles, and other items not deemed essential for daily life. As for the debtor’s personal home, state law varies once again.
Most states do not allow creditors to touch primary residences at all. If that is the law in your state, you could not lose your home to civil litigation as long as that home is your primary residence. If it’s not, it could be up for grabs.
Other states utilize what is known as a homestead exemption. This means that a certain amount of a home’s value cannot be touched. Let’s say the homestead exemption is $100,000. A home worth less than that could not be seized and sold. A home worth more could be, but the creditor must guarantee a minimum $100,000 payment to the debtor.
Although there are exceptions to the rule, the chances of you losing your home as a result of civil litigation are pretty slim. You could lose other property, though. You could also be subject to garnishment and judgment liens.