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Can my home be repossessed over credit card debts?

If you are worried about your debt, you are not alone. Over 8,000 people seek debt advice from the Citizens Advice Bureau in the UK every single day while Credit Action reports that someone is declared insolvent or bankrupt every four and a half minutes.

If you are struggling to pay your debts you may be worried that your home is at risk. Based on trends from the first three months of 2012, 105 properties are repossessed every day. So, it is understandable that you may be concerned about your home if you are struggling with debt.

But, can your home be repossessed over credit card debts? Our guide looks at the key difference between secured and unsecured debts and explains why your home is not generally at risk due to this type of debt.

The difference between secured and unsecured debts

There are two main categories of debt – secured and unsecured.

Secured debts are tied to an asset that you have given as security for the debt. Lenders place a legal ‘charge’ on the asset, giving them the right to take the asset if you fall behind on your payments.

Examples of secured debts include:

  • Mortgages
  • Secured loans
  • Car loans
  • Some hire purchase agreements for electronic goods, furniture etc

Unsecured debts mean you don’t provide any security for the debt. If you fall behind on your payments, a lender doesn't have the right to take any of your assets. They may pursue you for the debt through the courts, but they cannot seize any of your assets.

Unsecured debts include:

  • Credit cards
  • Unsecured personal loans
  • Payday loans
  • Store cards
  • Overdrafts

Why your home can’t be repossessed over credit card debts

Credit cards are the most common form of unsecured borrowing. As we saw above, this means that you don’t offer any security for this type of debt. As a credit card debt is not secured on your home, the lender has no legal right to repossess your home if you can’t pay your credit card.

As unsecured debts are not tied to any item of property, the creditor cannot take your property if you refuse to pay without taking out a ‘charging order’. If you don’t pay your credit cards, the creditor can only collect the money from you only by obtaining a court judgement.

One thing to bear in mind is that once a creditor has a court judgement they can collect it by taking some of your property. A creditor may employ a bailiff to collect property to pay the credit card debt that you have.

So, while your lender cannot repossess your home if you fail to pay your credit cards, they may be able to seize other items of your property in order to settle the debt.

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