Your home is your most valuable asset, so you probably prioritize paying your mortgage above everything else. If you find yourself without income, you may use what you have in savings to pay your mortgage for several months while using credit to cover other costs or falling behind on other bills.
Your creditors understand how important your home is to your financial stability, and they may try to leverage that knowledge to force you to pay them back. Hospitals, in particular, frequently seek liens against the homes of patients with massive medical debts.
After taking someone to court, the hospital can make a claim against their primary residence. What would a lien related to a medical debt judgment mean for you?
Your most valuable asset is at risk
Once a creditor convinces the court to rule in their favor and enter a judgment against you, they can record a lien against your real property with the county recorder’s office. Anytime you hope to transfer real property to someone else or refinance it, a title search will be part of the process. That search will inevitably show the lien.
You will effectively have to pay off the balance owed to the hospital before you can sell, transfer or refinance the home where you live. Especially if you count on your home equity as a source of stability in your golden years, being unable to access those funds without diminishing your total equity by tens of thousands of dollars could be a devastating blow.
Beyond that, there is also the risk that if you fail to make payment arrangements or fall behind on payments, the lender could eventually take legal action to force the sale or refinancing of your home so that they can get the money represented by the lien.
Staying out of court can help you protect your home
The process of obtaining a lien as a medical creditor is a bit lengthy. You will have some time in which to respond to the pending lawsuit and potentially protect your home from creditor claims. Filing for personal bankruptcy is a common choice made by those facing creditor claims and pending lawsuits.
The courts will issue an automatic stay when you file that will dismiss any pending lawsuits until you resolve the bankruptcy. The unsecured debts that you currently owe the hospital will likely be eligible for discharge. If your bankruptcy filing is successful, they will not be in a position to take you back to court after you discharge the debt that you owe the hospital.
Learning more about bankruptcy can help you decide if it is time to file to protect your biggest assets.