Legal Question in Real Estate Law in California

Are these people nuts? They are going to sit around and watch their home get foreclosed on, and only then file for bankruptcy? Where are these people getting their legal advice? In all probability they should file for Chapter 13 now which will 1) stop the foreclosure; and 2) wipe-out or reduce the principal and interest payments on the 2nd.

If the first forecloses by way of trustee's sale, the first cannot come after them for a deficiency, by operation of Code of Civil Procedure section 580d. But the second, on the other hand, becomes what is known as a sold out junior lienholder, and unless some exception applies, can bring a lawsuit against them on the note.

They should talk to a bankruptcy lawyer, as waiting until the last minute can have negative effects on a bankruptcy.

I agree with Mr. Roach. We are seeing relatively few attempts by lenders to come after borrowers for deficiencies, even when they can - and generally any lender who forecloses by trustee sale or who made a purchase-money loan, even a second, on an owner-occupied home will be barred by the antideficiency laws. Ch. 13 has much to be said for it, but it's not for everyone, especially those with other assets, and not all will qualify for it anyway.