Having unsecured debt like credit cards or personal loans can be stressful enough without worrying about your home being at risk Unfortunately, Texas law does allow creditors to potentially put a lien on your house for unsecured debts under certain circumstances Understanding how this can happen is key to protecting yourself.
What Makes a Debt “Unsecured”?
Unsecured debt is any debt that is not tied or “secured” to an asset used as collateral, Common examples include
- Credit card balances
- Medical bills
- Personal loans
- Utility bills
With unsecured debt if you stop making payments the creditor cannot seize a specific asset like a house or car to get repaid. However, they can take other legal actions to collect like suing you or garnishing wages.
Secured debts like mortgages and auto loans use your house or car as collateral, meaning it can be repossessed if you default.
How Creditors Can Place Liens for Unsecured Debts
In Texas, a creditor cannot just place a lien on your home for unsecured debts. They must first:
- File a lawsuit and get a legal judgment against you for the unpaid debt
- Record this judgment in the public records of the county where your property is located
- The recorded judgment then acts as the basis for the creditor’s lien against your property
So the creditor needs to turn the unsecured debt into a court-ordered judgment and then use that judgment to put the lien on the property.
Effects of a Lien on Home Ownership
A lien can significantly impact your rights and finances as a homeowner:
- It creates a “cloud” on the property’s title that must be resolved before selling or refinancing
- Most buyers and lenders will not purchase or lend on a property with an outstanding lien
- The lienholder has first claim on your home’s value, reducing your equity
- In some cases, the lienholder can foreclose and force the sale of your home
While you retain possession and use, the lien restricts your control until the debt is repaid.
Time Limitations on Debt Collection
Creditors cannot pursue unsecured debts forever in Texas. Key time limits include:
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Statute of Limitations – The window to file a lawsuit, typically 3-4 years on unsecured debts. If a creditor misses this deadline, they lose the ability to sue you.
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Judgment Lifespan: If you win your lawsuit, you’ll get a judgment, which is usually valid for 10 years. The creditor’s judgment must still be valid in order to put a lien on something.
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Expiration of Liens: A lot of liens end after 10 years if they are not renewed. An expired lien is unenforceable and can be removed.
Creditors who are careful can put liens on property, but they can’t do it forever without renewing the documents properly. Time can effectively eliminate the risks in many cases.
Homestead Exemptions Can Limit Liens
Texas has generous homestead exemptions that can protect a portion of your home’s value from creditors:
- Up to 10 acres of land plus improvements for a homestead property in a city
- Up to 100 acres (single adult) or 200 acres (married couple) plus improvements for rural homesteads
To receive exemption protection, you must properly file a homestead designation with your county. Consult a lawyer to ensure you fully comply with requirements.
While exemptions limit lien exposure, they do not prevent creditors from placing liens altogether in Texas. Proactive steps may be needed to defend your property.
Strategies for Preventing or Removing Liens
If you have unsecured debts at risk of judgments, consider these proactive tips:
- Maintain payment plans to avoid defaults whenever possible
- Dispute and validate debts to prevent improper lawsuits
- Seek legal counsel at first notice of a lawsuit
- Explore settlement offers to resolve debts pre-judgment
- Designate homestead status early with proper documentation
If a lien is placed, removal options include:
- Paying off the debt in full
- Settling for a negotiated lesser amount
- Proving improper procedures when the lien was created
- Filing bankruptcy to eliminate eligible debts
- Selling to a cash home buyer unaffected by title issues
Avoiding liens is preferable, but multiple strategies exist if creditors take action. Seek legal guidance to choose the best approach.
The Bottom Line
While not as direct as with secured loans, Texas law leaves homeowners vulnerable to potential liens being placed for unsecured debts under the right circumstances. Understanding the collection and lien processes can help you detect risks early and take measures to protect your property. If issues persist, consulting a lawyer well-versed in creditor defenses may prove invaluable. With proper precautions, you can reduce the chances of your home falling prey to an unsecured debt lien.
If You Dispute a Debt
If you dispute the legitimacy of something in your debt collectors file, you must give the collector written notice. Simply calling the collector wont cease collection activities.
If possible, send your dispute letter by certified mail (with “return receipt requested”) so you know it was officially received by the collector. The collector then has 30 days to determine whether or not the disputed item is correct.
If the disputed item is correct… The debt collector can continue collection activities.
If the disputed item is incorrect… It must be corrected. The debt collector must notify anyone who has already received a report containing the incorrect item. If, at the end of 30 days, the debt collector has not been able to determine whether the item is correct or not, they must make the change you requested and notify anyone who received a report containing the incorrect item.
Debt Collectors Can’t Take Your Home or Your Wages
In Texas, if your residence has been declared a homestead, it cannot be taken to pay a debt—except for debts taken for the purchase of the home (i.e., mortgage in default), for home improvements, for home equity loans or to pay certain taxes.
- Learn more about declaring your home as a homestead.
Wages may be garnished only to pay debts related to court-ordered child support, back taxes, and defaulted student loans. Debt collectors cannot garnish wages for repayment of consumer debt.
If a debt collector threatens to take your home or garnish your wages, you may be the victim of a debt collection scam. File a complaint with us immediately.
Getting Sued By A Debt Collector? DO THIS FIRST!
FAQ
Can a creditor put a lien on a home?
The creditor through which you secured financing for the home signed a legal document in which you gave consent for them to hold a lien for any debt owed in a written contract. This could happen if you have credit card debt, though. The credit card company could put a lien on your home until the debt is paid off.
Can a creditor place a lien on a house for unsecured debt?
Yes, a creditor can put a lien on your house to collect an unsecured debt if they win a court case against you. They can then use the lien to force you to pay.
Can a creditor enforce a lien on a property?
In some cases, lienholders may pursue foreclosure to enforce the lien. This legal process allows the creditor to force the sale of the property to recover the debt. The statute of limitations tells creditors how long they have to file a lawsuit to get a judgment for unpaid debt.
What is a lien for unsecured debt?
A lien for unsecured debt acts as a legal claim against your house if you owe money, granting the creditor rights to any proceeds from the sale of your home until they are fully repaid. If a creditor has placed a lien on your home, it’s essential to act quickly and seek legal advice for the best course of action.
Can a creditor take a property in Texas?
Texas law also protects other property types from being taken to pay judgment creditors. Most creditors will first try to take your bank accounts and other money that they can easily access, but some creditors will also seek to take physical property that they can sell to satisfy judgments.
How do you convert unsecured debt into a lien?
Transforming unsecured debt into a lien requires specific legal steps. After obtaining a court judgment, the creditor may file it with the local county recorder’s office, thereby attaching the lien to the debtor’s property. This filing restricts the debtor’s ability to sell or refinance the property without addressing the lien.
Can creditors put a lien on your house in Texas?
Can I lose my house to unsecured debt?
If the mortgage is not paid, the creditor can take your house. If you have other types of debt, your home is usually safe. If you own a home and stop paying your mortgage, the creditor can file a foreclosure action and force a sale of your home.
Can an unsecured creditor put a lien on your house?
An abstract of judgment is a summary of a judgment that states how much is owed for the debt, including attorneys fees and interest. The abstract of judgment is necessary in order for an unsecured creditor to record a lien against real property in California.
Who can put a lien on a property in Texas?
Any individual to whom a property owner owes money may put a lien on the debtor’s property, provided the property is not exempt from seizure. Some such individuals include laborers, contractors, subcontractors, material suppliers, architects, financial institutions, and state and federal tax boards.