What Happens to Your Home Equity Line of Credit When You Default?

Default equals. A home equity line of credit is just a line of credit secured by a lien on your home. Essentially, a home equity line of credit is exactly like a second home loan. Default under the home equity line of credit enables the creditor to foreclose and sell your home.

Lien

When you apply for and get a house equity line of credit, the lender will require you to sign a mortgage or trust deed, both of which are legal documents that give the creditor a lien on your home. The lien is your lender’s remedy if you default in your repayment on the line of credit. The creditor exercises which remedy by carrying out foreclosure after you default.

Notice

The very first thing happens when you default on your house equity line of credit is the lender will send you a Notice of Default and Election to Sell. This Notice of Default is an official letter which initiates the foreclosure procedure. The Notice of Default points out that you’ve breached your repayment obligation and the creditor intends to sell your house in foreclosure.

Acceleration

The Notice of Default also accelerates the home equity line of credit, which basically means that the creditor is now demanding payment in full online of credit. Rather than paying the line of credit off over time, after acceleration you must pay back the full amount of the outstanding balance on the line of credit immediately in order to prevent foreclosure.

Foreclosure Sale

Three to six months, depending on state law, after sending the Notice of Default, the creditor then has the right to send a note of a foreclosure deal. The foreclosure sale is a public auction where a third party, called a trustee, sells your home to the highest bidder and then uses the money earned to pay off the home equity line of credit. Any sales proceeds that are excess will be reimbursed to you.

Eviction

After the foreclosure sale, you no longer have a right to occupy your house. If you try and stay in the house, either the creditor or the new owner who purchased the house at the foreclosure sale may file an eviction suit and have the sheriff eliminate you from the house. Eviction means the sheriff forcibly removes you and your possessions from your house.

Caution

Default on a house equity line of credit is every bit as significant as according to a primary home loan. You stand to eliminate the very house that secures the line of credit. It should go without saying, then, that default should never be an option.

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Can Bankruptcy Prevent Foreclosure?

Foreclosure allows a mortgage business to seize property when the borrower discontinues his monthly payments. The rationale behind the lack of payments differs depending upon the homeowner, but frequently a change in financial situation is to blame. In cases like these, some people file for bankruptcy to stop foreclosure from occurring.

Truth

Bankruptcy prevents foreclosure through an automatic stay. Santa Clara University Law defines the automatic stay as an injunction preventing any creditor from taking legal actions against a person who has declared himself bankrupt. His mortgage company may not initiate or proceed with foreclosure. Debtors receive protection through the automatic stay regardless of whether their personal bankruptcy case is a Chapter 7 or Chapter 13.

Types

According to the Federal Trade Commission, Chapter 13 bankruptcy allows debtors to repay outstanding debts rather than lose property as a consequence of their previous inability to make payments. Chapter 7 bankruptcy, however, requires the bankruptcy trustee to sell off any non-exempt assets the debtor owns–including her property. Thus, if the individual’s home does not fall under the exemptions allowed by her state or the national government, she could lose her home to the bankruptcy court rather than her mortgage lender.

Characteristics

A debtor who can afford to cover his mortgage payments after the bankruptcy court releases other outstanding debts might have the option to”reaffirm” their own mortgages. This prevents foreclosure from the mortgage business whilst at the same time preventing the bankruptcy trustee from seizing and selling the property. Reaffirmation is readily available for debtors in Chapter 7 bankruptcy who would otherwise lose their homes provided they have sufficient monthly income to cover their house payments and the mortgage lender agrees to the reaffirmation.

Factors

In a typical bankruptcy case, irrespective of chapter, the automatic stay remains in place until the insolvency verification, which takes approximately 60 days. The U.S. Bankruptcy Code, but contains provisions which shorten the distance of the automatic stay if the debtor filed prior bankruptcies which were disregarded over the previous 12 months. If somebody registered one previous bankruptcy which was dismissed by the court, then the automatic stay just remains in effect for 30 days. If he registered two preceding bankruptcies within the past calendar year, the court won’t grant him an automatic stay.

Caution

Although filing for bankruptcy can provide debtors with an effective approach to reduce foreclosure from occurring, mortgage lenders may request the court to lift the automatic stay when preventing foreclosure hurts the lender’s financial interests. If, by way of example, the debtor’s income won’t allow him to make mortgage payments after his bankruptcy discharge, the court may raise the stay and permit the lender to waive (See References 1).

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The Way to Locate a Deed for Land

If buying or selling land, locating the land deed is extremely important. A land deed determines validity of possession. Without a deed, the landholder could face legal battles for the right to use, insure or construct on the house. Additionally, Linda Ashar's & Sandy Baker’s publication “The Complete Guide to Planning Your Estate in California” explains that a suitable deed will allow for smoother property transition into loved ones upon departure or property intrusion (see Reference 1).

Look for deed documents employing Web-based public records databases. Land deeds are registered at the county level, so you’ll should utilize a public document database which includes county documents along with the usual country records. Most county sites include such databases. If performing an internet search using a website not directly connected with your county of residence, you should always make sure the search directory hyperlinks back to an official county registrar website for verification.

Contact your county recorder or recorder ’s office right if your personal county does not have an internet database. As stated by Online Searches, a website offering free public records searches, most county recorder or registrar’s offices provide searchable public records databases (see Reference 2). But, smaller businesses across the United States may accept only telephone or in-person public records requests.

Request official copies of their land deeds as soon as you have found them. A computer printout or complimentary county registrar photocopy may not hold up in court. For the greatest legal protection to your land, you’ll wish to acquire a notarized copy from the county recorder’s workplace. In most counties you’ll be required to pay a small fee for a formal copy of the deed. Once you’ve paid the fee, copies can be obtained at the registrar’s delivered or office through certified USPS mail.

Hire a lawyer to contest the common-law ownership of your land deed if the official deed does not indicate the real owner. All land in the United States is deeded, and duplicates of these deeds are always documented by the county recorder or registrar. However, the deeds aren’t always updated if preceding land sales or inheritances were handled through improper channels. Once found, a deed can be contested if the land owner isn’t accurately represented on the deed.

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