Can A Creditor Take Your Home?
Can having a judgment against you leave you homeless? If you are sued for a debt, you may be initially very worried that the creditor will take your property, and leave you on the streets. In fact, some creditors may (illegally) threaten to do just this. But in fact, in Florida, a judgment creditor cannot take your house.
Mortgagees Can Take Your Home
Let’s start by clarifying that we are talking about creditors that are not your mortgage company. Of course, you signed a mortgage with your mortgage company, and pledged your home as collateral for the mortgage loan, so the mortgage loan company can take your house–that’s called a foreclosure.
Additionally, the protections that Florida residents have from having their homes taken by judgment creditors only applies to homestead properties–that is, the property that you consider to be your primary residence. That means that second homes, or investment properties, can potentially be taken to satisfy a judgment.
If a judgment is entered against you in Florida, and you have non-homestead property (that is, property that is not your primary residence), the creditor may assess or place on your property what is known as a judgment lien. This lien is not the same as a foreclosure, and it doesn’t mean that you are losing your property. The lien attaches to your property, and it will have to be paid off when you sell your home.
Practically, this means that when you sell the property, you are getting less than what you would have received from the sale because the amount of the judgment gets paid from the proceeds of the sale before you do.
Liens don’t just attach to the property you own now, but the creditor can even attach the lien to property that you don’t own today but that you may acquire in the future.
Liens on property have to be recorded in the public records, meaning that anybody can see if they have a judgment lien against their property.
Requirements for Homestead Protections
To get the benefit of Florida’s homestead protections, your property must be on less than ½ of an acre if it is located within a city or 160 acres if it is not (as the Florida constitution says, the property must be “outside of a municipality”).
So long as the property is homesteaded, it is entirely protected–even improvements in value. So, if you purchase property for $500,000, and you make so many improvements to the property that it is now worth $1 million, the full $1 million is considered protected, so long as the property is your homestead.
There are some limitations to the protections. Liens for construction (called mechanics liens) homeowner’s or condominium assessments, or certain kinds of tax liens, can attach to your property, and these liens can be foreclosed on, even if the property is your primary, homestead residence.