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Unsecured creditors and property liens

Although credit card companies are normally unsecured creditors, they may still be able to go through a process in order to convert their interest into a secured one in Kentucky. In the event a debtor is sued civilly and a judgment is issued, the creditor may then try to secure a lien against the real property owned by the debtor.

For many people in Kentucky, preventing home foreclosure is a primary concern. Most people have a primary mortgage lender that has a senior lien on the home. Although a judgment lien placed on the home by a creditor will have a junior status to the senior lender's interest, it is still possible for the judgment creditor to force the sale of the property in order to collect on the judgment.

The manner in which an unsecured creditor can effectively convert their interest from an unsecured one to a secured interest is by obtaining a civil judgment against the debtor in court. The creditor may then seek to enforce its judgment through such things as garnishments, account levies and by attaching liens against any real or personal property owned by the judgment debtor. Even if a sale is not forced, the resulting property lien can be used to prevent the debtor from being able to sell the property while it remains so encumbered.

People should be aware of this legal maneuver a creditor can take in order to collect on unsecured debt. Those who are seriously delinquent on their credit card payments may be able to negotiate a settlement or a payment plan to catch up on their payments. If the debt is simply unmanageable, filing for Chapter 7 bankruptcy can help stop all collection activities, including the filing of civil debt collection lawsuits by the unsecured creditors.

Source: SF Gate, "Can Unsecured Creditors Collect Their Debt from the Sale of My Home?", Ciele Edwards, December 12, 2014

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