hurtingazdad
recently joined
Reged: 08/20/08
Posts: 9
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What happens to a Home Equity Line of Credit loan after a foreclsoure on a house? House is worth about $180,000, we owe about $158,000 and have a $29,000 HELOC loan. Getting ready to divorce and will probably have to walk on the house (foreclosure) but was wondering how the HELOC fits in.
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guerino1
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Reged: 01/14/08
Posts: 525
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Hi Hurtingazdad,
Sorry to hear about your situation. A HELOC represents another lien on your house. If the home gets foreclosed on, I believe the order of payment is the primary mortgage holder, first, and then any HELOCs, in the order in which they were secured, and then any other lien holders, such as a construction company that puts a lien on your home because you didn't pay them.
When the foreclosed property gets resold (usually at auction), the primary lender will be doing everything they can to ensure they get "their" money. If you owe $158,000.00 and they sell it for $150,000.00, I believe you will still be responsible for owing them the difference of $8,000.00 and owing your HELOC loan company the $29K you owe them (may or may not be the same lender). You're primary lender won't care, nor will your secondary and tertiary lenders. Everyone wants their money. The only way you'll be able to deal with the difference is by either paying for it or declaring bankruptcy.
Be careful on the whole foreclosure thing, as it will have a significant impact on your credit.
My Best,
Frank
Edited by guerino1 (08/20/08 02:46 PM)
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hurtingazdad
recently joined
Reged: 08/20/08
Posts: 9
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We already filed BK in 2001. So that is out of the question again. Including my marriage couselor and our family couselor, I'm also looking into a financial counselor to help me understand credit and how to or not to use it.
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guerino1
addict
Reged: 01/14/08
Posts: 525
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The best answer to using credit is "don't".
The revolving interest on credit is too high for most people and a credit card shouldn't be used for anything more than a month-to-month carryover of expenses that you intend to pay, fully, at the end of each month.
I recommend you learn to live off of what cash you have at hand (while paying down your credit cards) and you'll learn to live within your financial limits. Most people don't and get screwed.
As far as paying down your debt while the divorce is going on, be careful. What you do to help yourself now might only hurt yourself, later. Make the bare minimum monthly payments on credit cards without charging more until the divorce is done and you know how debts will be split.
My Best,
Frank
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FrustratedinPA
recently joined
Reged: 09/11/08
Posts: 4
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Quote:
The best answer to using credit is "don't".
The revolving interest on credit is too high for most people and a credit card shouldn't be used for anything more than a month-to-month carryover of expenses that you intend to pay, fully, at the end of each month.
I recommend you learn to live off of what cash you have at hand (while paying down your credit cards) and you'll learn to live within your financial limits. Most people don't and get screwed.
As far as paying down your debt while the divorce is going on, be careful. What you do to help yourself now might only hurt yourself, later. Make the bare minimum monthly payments on credit cards without charging more until the divorce is done and you know how debts will be split.
My Best,
Frank
I am getting conflicting answers on this subject of paying off credit card debt so I'd like to hear other stories...My financial guy helping me to get pre-approved when this mess is over said I SHOULD pay off cards...my attorney says I SHOULD NOT because STBX MIGHT be laible for 1/2 the debt. Any solid evidence on who's advice is the best to follow?
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guerino1
addict
Reged: 01/14/08
Posts: 525
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Hi FrustratedinPA,
I would talk to your attorney about everything. It's not that I don't agree with paying off your loans. It's that if you're not divorced yet, paying off loans might change the way a judge decides things. Just be careful. You really need to speak with your attorney to know of not paying off your loans 'until the divorce is over' is a better strategy than paying them off 'before the divorce is over'.
My Best,
Frank
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katiebear22
journeyman
Reged: 06/29/07
Posts: 66
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The difference is that the financial guy is trying to show you what is best for you and your credit/financial status, while your attorney is trying to keep his client from paying money he may not have to pay in the first place. I think the best advice I've seen here is just to pay the minimum on the cards to keep the payments current (and build your credit history) and wait to see how the divorce plays out before you pay stuff off.
Example... if you have a credit card that you owe 10k on, but that card debt is "awarded" to your ex in the divorce, than the 10k you would have paid can go toward something else that YOU are required to pay in the divorce.
I would also note that a divorce decree does not override your contract with the original creditor, so they can still hold you liable for the debt if they choose... which means that if one party does NOT make the payments they are supposed to, it may still impact the other person on a joint account. PM me if you have any other questions I can help with... I wish you the best. -Katie
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Success is not final, failure is not fatal: it is the courage to continue that counts.
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