Foreclosures Discussion Archive 11

Junior Lien Holders Only Paid from Overbid

Posted by Keith(CA) on November 30, 2004 at 18:22:54:

In Reply to: Second Lien Holder Not paid after foreclosure posted by Robert Erik on November 30, 2004 at 11:32:59:

When the first foreclosed, there was a public sale. Either someone bid at that sale, or no one did.

If no one bid, then the lender simply took title to the property and all junior liens were wiped from the title, leaving all of those debts unpaid.

If there was a bidder at the sale, then any amount over and above what the first required to satisfy their claim at the foreclosure sale would then go to the most senior of the junior lien holders. Should there be excess after that lien holder is paid, then the overbid money is applied to the next junior, and so on and so forth until the overbid money runs out or all liens are satisfied (in which case the owner would recieve the balance left over).

Regardless of how it all panned out in the end, all of the junior liens are left hanging because their security interest in the property was extinguished by the foreclosure (they had notice and should have secured their position, but they didn't). Since they can now no longer foreclose to get their money back, they will be hounding you to collect.

As creditors, they have every right to try and collect from you what you owe them. Your credit is probably already shot due to the foreclosure, so you might want to consider bankruptcy. If nothing else, talk directly to the second lien holder and tell them you've got nothing to lose by filing bankruptcy, but that you'd still try to make some good out of the situation. Offer to settle for 10 cents on the dollar and see what they say. Maybe they'll agree, or negotiate some kind of reduced payoff.

There are a lot of possibilities, but unless you are protected by the court under bankruptcy or simply make arrangements to take care of that debt, then that collection agency will continue to bother you.

: Texas - I had signed on a house for my ex-wife during our divorce (for her and baby). She subsequently remarried (I had a clause in the divorce decree that after remarrying she'd have 90 days to get the property in her name.) A few months after her marriage she stopped making the house payments and foreclosure began.

: There was a second lien holder (to avoid paying PMI insurance). Is the primary lien holder required to pay the secondary lien holder after the property is sold?

: The junior lien holder has givin the account to a collections agency whose been bugging me and I'm wondering what my rights may be.

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: When the first foreclosed, there was a public sale.  Either someone bid at that sale, or no one did.
: If no one bid, then the lender simply took title to the property and all junior liens were wiped from the title, leaving all of those debts unpaid.
: If there was a bidder at the sale, then any amount over and above what the first required to satisfy their claim at the foreclosure sale would then go to the most senior of the junior lien holders.  Should there be excess after that lien holder is paid, then the overbid money is applied to the next junior, and so on and so forth until the overbid money runs out or all liens are satisfied (in which case the owner would recieve the balance left over).
: Regardless of how it all panned out in the end, all of the junior liens are left hanging because their security interest in the property was extinguished by the foreclosure (they had notice and should have secured their position, but they didn't).  Since they can now no longer foreclose to get their money back, they will be hounding you to collect.
: As creditors, they have every right to try and collect from you what you owe them.  Your credit is probably already shot due to the foreclosure, so you might want to consider bankruptcy.  If nothing else, talk directly to the second lien holder and tell them you've got nothing to lose by filing bankruptcy, but that you'd still try to make some good out of the situation.  Offer to settle for 10 cents on the dollar and see what they say.  Maybe they'll agree, or negotiate some kind of reduced payoff.
: There are a lot of possibilities, but unless you are protected by the court under bankruptcy or simply make arrangements to take care of that debt, then that collection agency will continue to bother you.: 

: : Texas - I had signed on a house for my ex-wife during our divorce (for her and baby). She subsequently remarried (I had a clause in the divorce decree that after remarrying she'd have 90 days to get the property in her name.) A few months after her marriage she stopped making the house payments and foreclosure began.
: : There was a second lien holder (to avoid paying PMI insurance). Is the primary lien holder required to pay the secondary lien holder after the property is sold?
: : The junior lien holder has givin the account to a collections agency whose been bugging me and I'm wondering what my rights may be.


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