In today’s iffy economic climate, some consumers are concerned about keeping up with their bills. Gery in Florida wonders if credit card lenders can come after his Florida rental property if he is not able to make his card payments. He also owns a primary residence on which he claims a homestead exemption.

“With everything that has been going on, my wife faces possible employment loss,” Gery writes. “We carry a significant amount of credit card debt and we fear if she loses her job, we might not be able to make ends meet, let alone be able to pay our balances. Everything has become so much more expensive, even on our rental we are no longer profitable. We would most likely lose the tenant if we raise rent on them.

“If she loses her job and the impact becomes too heavy to bear, will credit card companies force us to sell the property we rent to pay off the credit card obligations? I can only assume in a bankruptcy, the courts may force us to liquidate the property, but filing for bankruptcy is not on the table for us.”

Creditors would have to get a judgment against you

Lenders will want their debts paid off, but they can’t just seize your property to satisfy their claims. They will have to go to court and present their case. If they file a case against you, you will get a court summons to respond to the case.

You should respond to the summons in a timely manner, since you will be given a deadline to provide your input. The time frame to respond varies and will depend on your locality. If you don’t respond to this summons, you will likely lose the case by default since you haven’t presented your case. So take care to respond in a timely manner. If a creditor prevails in a case against you, it is said to get a judgment against you.

Armed with this judgment, the creditor can place a lien on your real estate that will sully title to the property. This means you will be impeded from selling or refinancing the property without clearing this claim against it.

Don’t expect homestead exemption to cover rental property

A judgment lien would allow a creditor to force you to sell your real estate. Whether they do this will depend on how much of their debt they expect to retrieve from the sale. It costs a considerable sum to pursue a property sale, so a creditor would have to be sure the profit would be worth pursuing this remedy.

Net proceeds from a sale will first be used to pay off any mortgage on the property and then other liens, such as a mechanic’s lien put in by a tradesperson, assessment liens or tax liens. If the property is your primary residence, it typically enjoys a homestead exemption that protects your home equity from being seized by creditors.

However, this homestead exemption does not apply to rental properties in Florida, and typically in other states too. To enjoy the homestead exemption on a property, it would have to be your primary residence. If the property doesn’t have the homestead exemption, creditors may find it worthwhile to force you to sell it. This will depend on how much money the creditor will net after paying the costs involved in pursuing a sale, and how much residual equity is in the property (after paying off a mortgage and any other liens).

Discharge of debt in bankruptcy

Going through a bankruptcy procedure to get your debt discharged will give you a fresh start financially, but it will have harsh fallouts on your credit report and financial life. Bankruptcy should only be contemplated if no other course is available.

If a creditor has a judgment lien on your rental property, the credit card debt (which is unsecured debt) will become secured debt, since the lender will have a claim on your property. It will not be easy to avoid paying this debt by going through the bankruptcy process if you have equity in the property.

If the credit card lender does not have a lien on your rental property, you may be able to discharge unsecured credit card debt by going through the bankruptcy process.

It would be best to consult with an attorney on your individual situation to determine whether a bankruptcy filing will be a good option for you.

The bottom line

If you haven’t been keeping up with your credit card payments, the card issuer can get a court judgment against you to pay your debt. It will have a claim on your rental property if it then places a judgment lien on it. That lien means the title to your property is not clear. You will find it difficult to refinance or sell the property without satisfying this claim.

Rental properties do not typically enjoy the homestead exemption that protects the home equity of primary residences. This means the creditor might find it worthwhile to force a sale of your property if it’s equity rich. Gery, you should consult with a bankruptcy lawyer who can provide input specific to your situation.

Contact me at with your credit card-related questions.