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Can a Creditor Take My House in New York?

It is possible for a creditor to take a house in New York state. And it is possible that a creditor’s attempt can be thwarted if they don’t follow the law. What that law is and what it means to you is explained in this article. But, firstly, if you need legal guidance regarding debt, please don’t hesitate to consult with experienced debt relief attorney John D’Amato.

Can a Creditor Take My House to Pay My Debt in New York?

Yes, it’s possible for a creditor to ‘take’ a debtor’s house to obtain the payment of debt. “Taking” in this context means claiming legal rights to the house, not necessarily seizing it.

To take a debtor’s real property, the creditor first has to sue the debtor and win in court. The court’s decision will be called a money judgment, and it turns the creditor into a “judgment creditor.” As a judgment creditor, they can place a lien on the debtor’s property. A lien is a legal claim attached to the property, indicating that the creditor now has a right to it.

If a creditor has placed a lien on your home, it means the creditor has the right to the proceeds when you decide to sell the house. The creditor also has the power to sell the house themselves. However, a vast majority of creditors decide not to force the sale because it would require them to shoulder foreclosure costs.

Can a Lien be Placed on My House for a Spouse’s Debt in New York?

Yes, a lien can be placed on a jointly owned home in New York, but it is attached only to the debtor-spouse’s interest (share) in the property. This, however, isn’t as simple as splitting the shares 50-50. In New York, when a married couple has joint ownership of a home, each spouse owns it “by the entirety,” meaning each of them owns the whole property.

If a creditor wants to foreclose on the property due to one spouse’s debt, the court will likely protect the non-debtor spouse and prevent the foreclosure. The only time the creditor can sell the property is if the non-debtor spouse passes away first, thus leaving the debtor spouse with sole ownership of property. If, on the other hand, the debtor spouse passes away first, the creditor may get nothing.

Bankruptcy Automatic Stay: Initial Protection for Your Home

If you’re dealing with debt and decide to file for bankruptcy, you can instantly protect your house through the Automatic Stay. This “stay” is a court injunction directing all your creditors to stop any collection action against you – including foreclosure lawsuits – while the bankruptcy case is in progress. The injunction takes effect the moment you file for bankruptcy.

However, the Automatic Stay does not always last very long. A creditor may send their attorney to Bankruptcy Court to ask for relief from the stay. If the judge grants their request, the creditor may legally resume their collection against you.

What is a Homestead Exemption? Can It Let Me Keep My House?

Under Bankruptcy Law, homestead exemptions are specific provisions that let you keep some or all of the equity in your primary home. These exemptions apply when you file for Chapter 7 bankruptcy. If you’re selling your home with a creditor’s lien on it, you will be able to keep the exemption amount first, and the creditor will get the remainder.

For example, the homestead exemption amount in Erie County in 2023 is $89,975. If your home equity is $100,000, you may keep $89,975 of that and the creditor will claim the remaining $10,025 upon the sale of the house. But if your home equity is lower than the exemption amount, it means that all of your equity is covered by the exemption and you will likely get to keep your home.

How Do I Protect My House with a Homestead Exemption in New York?

Homestead exemptions are automatic as you file for bankruptcy. You simply need to declare the exemption you wish to claim in your bankruptcy form “Schedule C: The Property You Claim as Exempt.” Note that a homestead exemption applies only to your primary residence or the home in which you mainly reside. It can be a house, condominium, or mobile home, but it has to be your primary home.

New York is one of the states that let you choose between federal and state exemptions. Each set of exemptions comes with its own rules and amounts, so you’ll want to consider which one is more suitable for you. If you need legal guidance, it’s always helpful to speak with a trusted bankruptcy lawyer.

Contact John D’Amato, Buffalo Bankruptcy Attorney

In the last 30+ years, Western New Yorkers have relied on Attorney John D’Amato for help on debt relief. Mr. D’Amato’s smart legal strategies have led to successful debt management, legal protection for property, and effective bankruptcy filings for thousands of clients. Talk to him in a confidential consultation. Call Attorney John D’Amato at 716-706-0000 today.

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