Seniors Legal Line - June 2009"Do I have to use the sale proceeds of my home to pay off a $20,000 judgment-lien on it (due to unpaid credit cards)?"
Dear Seniors Legal Line:
I have a $20,000 judgment-lien on my home due to unpaid credit cards. I plan on selling my home and using the proceeds to purchase a condominium nearer to my children. I am worried that I will have to pay the credit card judgment out of the proceeds of the sale of my home. If I do, I won’t be able to afford to buy the condominium. Do I have to use the sale proceeds of my home to pay off this judgment-lien?
No, you do not have to use the proceeds from the sale of your homestead to pay off the judgment-lien. In general, you may use the entire proceeds to buy your new condominium. (Debts for construction, repair, or improvement of the home; mortgages; and debts for child support or spousal maintenance will still be collectible). Minnesota law protects homesteads, so that you can sell your homestead and the sales proceeds remain exempt from collection for up to one year, if you take the proper steps. In other words, you have up to one year after selling your home to use the proceeds to buy another homestead; after that, the proceeds become available to pay off the judgment-lien.
In this situation, a homestead is defined under Minnesota Statutes § 510.01 as the “house owned and occupied by a debtor as the debtor’s dwelling place, together with the land upon which it is situated to the amount of area and value hereinafter limited and defined….” Currently, a homestead is exempt up to 160 acres and $300,000 in value ($750,000 if used primarily for agricultural purposes). See Minn. Stat. § 510.02 subdivision 1. Most people’s homes fall within the protected amount and size, so as long as you use your home as your primary dwelling place, you most likely have a homestead that falls under the protections of Minnesota Statutes Chapter 510.
When the credit card company sued you and obtained a judgment, the judgment automatically became a lien on any real estate that you own in the county in which you were sued. The judgment is good for 10 years and can be renewed for another 10 years. The reason why the credit card company has not been able to do anything to your home is because your homestead is protected under Minnesota Statutes § 510.01. The homestead “is exempt from seizure or sale,” which means that if a credit card company obtains a judgment against you, they cannot foreclose or otherwise force you to sell your home.
As described above, when you decide to sell the home, you can use the entire proceeds to purchase a new home, as long as you do so within one year of the sale. If the credit card company says that they are entitled to $20,000 of the sales proceeds, you should go to an attorney. If the credit card company still does not back down after seeing the statutes described above, the attorney can then make a motion to the Court to make sure the sale goes through without having to pay the credit card company. Note: generally, the credit card company will have a lien on the new home.
Note: The homestead exemption will only last if the home continues to be your dwelling. If you move out or are otherwise absent for six months, you will be deemed to have abandoned the homestead under Minnesota Statutes § 510.07. To prevent this, be sure to file a Homestead Declaration every six months with the County Recorder’s office in the county where the homestead is located. You may do this for up to five years. You may not think this comes up very often. But some examples of possible situations where this may come up are with nursing homes and travel. Many people have to temporarily move into a nursing home for rehabilitation which may take more than six months. “Snow birds” who winter in another state may be away from home for six months or more. Any time you are not residing in your homestead, you should be aware of this six-month deadline and file the declaration in order to be sure to avoid losing your homestead status.
This column is written by the Senior Citizens’ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live in the Northland, you may contact the group with questions for legal help by writing to: Senior Citizens’ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to www.lasnem.org. Reprints by permission only.