Legal Question in Real Estate Law in California

Re: forclosure/equity line liability

If the holder of a senior lien on a property forecloses, holders of junior liens generally lose their collateral, and are known as "sold out juniors." This would be the case with the lender on your home equity line of credit.

A "sold out junior" is an unsecured creditor and loss of the collateral will be a default, so yes the lender can sue, and if and when the lender wins the lawsuit and gets a judgment, it will have various enforcement tools available such as liens, attachment, garnishment, etc.

As to a deed in lieu of foreclosure, I would see this as being difficult to pull off unless an arrangement is made to pay off the line of credit. The senior lienholder would be receiving the property "subject to" the line of credit, since this is a sale rather than a foreclosure and the lien of the line of credit would still attach to the property. There could be some creative technique for doing a deed in lieu under these circumstances, but I'm unaware of it.