Legal Question in Real Estate Law in California

Re: What if you stop paying your heloc but stay in your home/

My crystal ball is broken today, so I cannot tell you what they will do. I can tell you what they can do, but I think you may already know this. They can foreclose on the property - either judicially or non-judicially. If they elect to foreclose non-judicially, they may be barred from pursuing you for a deficiency under what is referred to as the "one-action rule" or "election of remedies rule." If they foreclose judicially, they will recover the property, but have to deal with the first mortgage holder. They will then, however, most likely have the ability to obtain a judgment against you for any deficiency.

Finally, they can simply sue you under the promissory note, and forego their security interest in the home.

One possible course of action you should consider is to file a chapter 13 bankruptcy, and strip the second lien from the home - turn it into an unsecured debt. While the bill did not pass in congess allowing for judicial loan modification, even before that debtors could strip a wholly-unsecured second mortgage from their home. It is not an inexpensive option, however, it might be the solution given what you describe. Feel free to email me off the list to discuss this further.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.