Written by attorney Gary Alan Armstrong

Credit Card Judgments and your Homestead: How to get clear title!

"Help! I cannot close on my home sale/refinance because there is a judgment lien from an old credit card against my home!" I get this question all the time. Fortunately, there is a solution and you don't have to pay the judgment to get clear title.

First let me clear up a misconception. Involuntary liens, like judgments, are not placed against specific properties. Instead, an "Abstract of Judgment" is filed in the county records and then attaches as a lien to any non-exempt assets of the debtor in the county.

Under Texas law, though, credit card judgment liens do not attach to homesteads. So, while the judgment is filed in the county, it does not actually attach to a homestead.

Unfortunately, if you want to sell the home, or refinance the home, the title company will usually require a release of the lien against the homestead. If you cannot sell or refinance without title insurance and you cannot get title insurance unless the lien is cleared, then the judgment is said to "cloud" the title to your property. It's not attached, it's just that the title company will not issue insurance while the lien is out there. That's a business decision the title insurance company makes, not a legal decision. The lien is a risk they don't want to take because they cannot be sure that the property has been your homestead the entire time the judgment has been outstanding.

There are several ways to approach this problem.

One way is to just do nothing. As long as you are not trying to sell or refinance the property, this is just fine. The judgment creditor cannot foreclose on the property while it is your homestead.

Secondly, you can draft a partial release of lien and write a demand letter to the judgment creditor, or its attorneys, insisting that they provide a partial release of lien for you on the homestead. They may insist on some kind of affidavit that the property is, and has been throughout the life of the judgment, your homestead.

Which brings us to the third method, which also involves a demand for a partial release and an affidavit. But, this method is specifically set out in the Texas Property Code and provides that if you follow all the procedures in the Property Code and if the judgment creditor fails to provide the partial release, you can record an affidavit in the property records to show that the property is your homestead. The title company is then supposed to be able to rely on that affidavit and the property code procedure to issue a title policy. The Property Code section is 52.0012 and the Property Code can be found at this website: You must follow the procedures exactly in order to benefit from the Property Code provisions.

The problem with the Property Code method is that it takes at least 30 days. Sometimes people are in a bigger hurry to close on a transaction. In that case, the title company may offer to simply hold a judgment payoff in escrow until the lien release is received. Or, you can pay the judgment off "under protest" and sue later to recover the amount paid.

My general approach depends on whether the release is needed very soon or not. If it is needed soon, then I write a letter to the judgment creditor's attorney, together with the form of partial release of lien and an affidavit from my client. I then follow up with phone calls and faxes to try to get them to sign the release. In the mean time, I may start the formal Property Code method, too. Finally, if no release is in sight then I try to get the title company to close and pay the judgment payoff "under protest," followed by a lawsuit against the judgment creditor to recover the funds and attorney's fees.

The vast majority of the time, the judgment creditor's attorney will timely provide a partial release of lien. They are certainly aware of the law as discussed above and they know that they can be held liable for any damages for failure to provide the partial release. Sometimes a letter from an attorney, though, gets action from them where a debtor acting all by him or herself does not work.

Indeed, in my experience, judgment creditors' attorneys sometimes try to extract a payment to issue the partial release when they are dealing with the debtor personally. But, they know better than to try that with an attorney.

If you are having trouble getting a partial release of lien on your homestead from a credit card judgment, contact a real estate attorney in your area. If the judgment creditor is demanding that you pay the judgment lien in order to get the release, then see a fair debt collection practices attorney for assistance.

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