Key points:
- Simply put, an unpaid credit card can result in a homeowner losing their house without proper intervention. Although credit cards are unsecured, companies can secure the interest on a property if necessary.
- Anyone who thinks their situation is heading down this path needs to get ahead of the curve now. Get in touch with professionals to discuss debt consolidation options.
Why an unpaid credit card can impact your homeownership
In this video, I chat with Josh Balner from Strategic Credit Solutions about the potential of losing your house because of unpaid credit card debt. A lot of this information was surprising to me, so I think it’s important to share it in case anyone finds themselves in this situation.
Contact Josh Balner:
Website: Strategic Credit Solutions
Don’t feel like watching? Find the full transcript below!
Chris: [00:00:00] Today, I’m being joined by Josh Balner from Strategic Credit Solutions to answer a question that may have a surprising answer. Can you lose your home over an unpaid credit card? Josh is the principal and owner of Strategic Credit Solutions, a very unique service that employs a network of lawyers to reduce consumer debt without filing consumer proposal or credit counseling.
Chris: [00:00:40] Josh, I have to ask you. Can you lose your house over a simple credit card?
You CAN lose your home due to an unpaid credit card
Josh: [00:00:47] Chris, that’s a great question, and it’s a question that a lot of people are going to want answered in the very near future. And the simple answer is yes. Most people don’t know that when you accept a credit card, you need to read the fine print. And something that reads is an unsecured Visa or MasterCard can very quickly become secured and do just that: costs you your home.
Chris: [00:01:10] That blows my mind. I mean, we understand debtor creditor law. We have secured debts which are things like mortgages or secured lines of credit or car loans secured on on the vehicle. And then you have unsecured debt – credit cards. So it blows my mind. I mean, that’s even news to me that over a credit card, if it’s not paid, a credit card company can actually secure that interest on your home. And you can also lose your home over that. Is that what I’m hearing?
Josh: [00:01:44] That’s exactly correct. So under the terms of the contract, once you fall into default, you miss usually three payments. What the creditor will do is they’ll do an asset investigation. And if they determine that you do own real property, instead of sending it to a third party collection agency, more often than not, they’ll send it to a law firm, and their instructions to that law firm will be seek a judgment and attach that in the form of a lien and a writ of seizure and sale against the home.
Chris: [00:02:13] Wow. And so at that point, so if anybody is getting to the point where they’re getting a letter from a lawyer, that now there’s a judgment and it’s now against the property, what should they what should they do at that point in time?
If you’re falling behind on debts, plan your next move now
Josh: [00:02:30] They should immediately seek out professionals to investigate the possibility of a consolidation loan. I would say that’s the best place to start, because if you’re receiving that notice, there’s probably equity in the home and this is something that they would have determined. People also don’t know that the banks and their collection agencies and law firms have the same tools available to them that mortgage professionals and lawyers do. So they can actually go through the land registry office and confirm the value of the home, the amount that’s owing on the mortgages, who’s on title, all of that stuff. So if you’ve received a notice of their intention to proceed with a default judgment against you, or even worse, an eviction or a power of sale, it’s imperative to take matters into your own hands because the bank won’t leave you a choice. Once they go there, you’re really you’re out of time and you’re out of options. So you want to be pre-emptive about this. I would actually say it would be prudent to seek out a financial professional mortgage professional pre-emptively. If you’re falling behind on debts and you know that this is the eventual outcome, it’s better just to head this off at the pass and get ahead of it. Don’t let them get to that point.
Chris: [00:03:48] Right. Right. Because one thing is falling behind on a credit card. Another thing is to have the credit card company go to the courts and get judgement. And then from judgement, it’s another thing to also get to the point where the sheriff gets involved and he goes, power of sale and you can be evicted. So there’s an order of of operation here. And so just to confirm, it is possible to be evicted, to have a sheriff show up at your door if you ignore the demands and the letters over – it doesn’t happen overnight, obviously. But if you just say, well, that was a credit card, it was unsecured, why would I lose my house? You can.
The economic and real estate climates are changing
Josh: [00:04:31] Yes, absolutely. And what we’re seeing now in the shifting economic climate, we’re seeing that these creditors are becoming more litigious. And in my 11 years of experience representing clients against these type of actions, we’ve never seen them take that step. We’ve never seen them change the locks over a simple credit card. It hasn’t happened until about 60 days ago. And the reason why I feel it’s prudent to have this conversation, begin educating the public, is because we’ve seen things happening in the marketplace for the last four or five months. We’ve heard things and some sources high up within the internal recoveries divisions have told their collection agencies and law firms to expect an unprecedented surge of delinquency next year. And accordingly, they’ve instructed those lawyers to act more litigious to protect their interests. And we have a theory on why this is. So if you can imagine you are owed money, let’s imagine that you are the bank now and you’re the borrower stops making payments to you. But you know, they have a home. And you know that if you attach yourself to that home, values will continue increasing for ten years. You’re going to make interest at 20 to 30% every single year like clockwork against an asset that is very stable. You’re probably going to put yourself in a position where you protect your investment by getting that judgement and attaching to the home, but you have no impetus to actually action the sale because you know that you’re making 20 to 30% year over year. Now we’ve got a market that’s heading in the other direction and you’ve got these banks that are becoming extremely weary of the delinquency wave that everyone expects in late Q1, early Q2 2023. And now they’re trying to shore up their losses. They want to make sure they get ahead of this because they don’t necessarily think that Canadian real estate is in the same shape that it was a year or two ago, where it’s a safe investment to attach themselves to the home and wait. They’d much rather collect that money now.
Chris: [00:06:34] Wow. Well, that’s very interesting. I mean, I’ve been a mortgage broker for 15 years, 16 years now. And I can’t recall an instance where we’ve ever seen somebody potentially lose a home over a credit card. And yet in in in recent times we have seen it. You and I have discussed this. So I think you’ve given some guidance and rightly so. There’s a little bit of shame around debt and sometimes people ignore it and it’s it’s a symptom of other issues in life. So the best guidance is to get in touch with a professional early on. Deal with debt before it piles up and becomes this this problem. If anybody is watching this and they are getting demand letters from lawyers and or eviction notices from sheriffs, should they be in touch with you? How can you help?
A quick word of advice…
Josh: [00:07:32] Well for us to do what we do, it’s predicated entirely on the client’s ability to raise a lump sum of money. So the first step would be to reach out to a mortgage broker to begin the process of the consolidation loan. Once the broker has confirmed that there is in fact a loan available to them, that’s when I would get involved. My, my, my words of caution to anyone watching this that is in that situation: Don’t engage with the law firm. Don’t engage with them at all. Any information you provide to them will jeopardize our opportunity to reduce the debt at a later junction. These lawyers are adept at trapping people in their comments and their words. Everything you say is documented. Everything you provide them is saved. So in passing, if you make a flippant comment, it’s going to go down in the file and it’s going to hinder us down the road. So it’s also important to note there is no defense, there is no acceptable defense in the court beyond I did not sign the contract or I did not spend the money that will avoid a default judgement being secured. So a lot of people think, well, I have a court date. I should attend the court date and plead a hardship case. That’s not a defense, you’re going to lose. And what it’s going to do is that you’re going to incur additional costs for the lawyer going in there to take the time to hear this argument. And you’re also going to create a very negative sentiment towards you. And it’s going to make our job very challenging because these creditors don’t like wasting time.
Need more help or information?
Chris: [00:09:02] Yeah. Yeah. Great. Great guidance, Josh. And I think this is something that needs to be discussed a little bit more. It was it is news to me. And I thank you for spending some time with us today to discuss the issue and enlighten us. So thank you very much. I will include Josh’s contact information at the end of this video. If you’d like to get in touch with Josh directly, he would encourage you to do so. My name is Chris Molder, Toronto mortgage broker. If you have any questions about how we can help solve any difficult mortgage situations, please reach out with confidence, any time. Bye for now. Thanks so much, Josh.
If you’d like to discuss your mortgage, you can contact me here or schedule a convenient call time directly into my calendar below.
