When creditors sue, will they use a lien, garnishment, or bank?

[sarajd]

Hi,
I posted earlier about a clause in our mortgage stating default if you file bankruptcy. No one responded and I don't go see Att. for almost two weeks. I was wondering if he advises me not to file ( I can't lose our home ) then what is the most used means creditors go after in recovering their money. All of my debt ( around $20,00 )is in credit cards but all are basically lower balances( I just have alot of them !!)The highest one is $1700, most are under $ 1,000, quite a few are $500 or under.We had to refinance last year to get a fixed rate so we have only around $ 5,000 in equity and only 1 year into 30 year loan.What exactly is a lien anyway?Will they make you sell your house or does it mean that if you do they get their money first? I work a part time job so the 25% they could garnish wouldn't hurt as much as something against house. I plan on getting husbands checks deposited in different account if I can't file, so if they want to freeze my account then fine--they wouldn't get much!! We don't live in community property state and all cards are in my name. Thanks, any knowledge would be appreciated!!!

[JusticeForAll]

Hi sarajd!

9 times out of 10, even with a BK/default clause in your Mortgage, as long as you are current and reaffirm the debt, most Lenders will not foreclose on your property.

Remember, they want your money, NOT your house. Foreclosure is expensive and if you don't have much equity in the house, they will lose money big time to foreclose.

So, I wouldn't be too concerned about that.

To answer some of your other questions, creditors can use all means you mentioned to get their money. Sue, send you to collections, garnish wages if your state allows and freeze bank accounts. They have to get a judgment against you first to do any of that.

A lien is something that gets attached to the title on your property, usually real estate, but can also be done with cars.

What that means is when you go to sell your home, the buyer's lender does a title search and the lien will show up. You cannot sell until the lien is paid, in full, or will be paid in full at closing from the proceeds of the sale.

Hope that helps a little. Good luck with your attorney!

Hi,
I posted earlier about a clause in our mortgage stating default if you file bankruptcy. No one responded and I don't go see Att. for almost two weeks. I was wondering if he advises me not to file ( I can't lose our home ) then what is the most used means creditors go after in recovering their money. All of my debt ( around $20,00 )is in credit cards but all are basically lower balances( I just have alot of them !!)The highest one is $1700, most are under $ 1,000, quite a few are $500 or under.We had to refinance last year to get a fixed rate so we have only around $ 5,000 in equity and only 1 year into 30 year loan.What exactly is a lien anyway?Will they make you sell your house or does it mean that if you do they get their money first? I work a part time job so the 25% they could garnish wouldn't hurt as much as something against house. I plan on getting husbands checks deposited in different account if I can't file, so if they want to freeze my account then fine--they wouldn't get much!! We don't live in community property state and all cards are in my name. Thanks, any knowledge would be appreciated!!!

[sarajd]

Thanks JusticeForAll!!
You put my mind at least a little more at ease. I'm SO stressed out over all this. I stopped paying cc's in September to try and save up, so phone calls that are already bad are going to get worse!! Do you know anything about having credit cards that are with same bank as mortgage? They;re not under same loan or anything--I had all before we even refinanced. My mortgage is Citifinancial and I have a Shell, BP, Citgo and HomeDepot card that are financed thru Citibank.I also have 2 $500 regular Visa cards that are Citi. Will they foreclose on you if you get behind on accounts like that even though they are considered unsecured?I'm so upset about this whole mess I can't sleep!! All my thoughts are consumed by this! Thanks again for replying.

[JusticeForAll]

Hi again

What you're asking about is called "cross collateralization" (try saying that 3 times real fast ). Unfortunately, I don't have much experience in that area and I'm hoping someone with more experience will chime in.

You are seeing an attorney in two weeks, right? Make sure you start right now, making a list of questions for him/her. It will help tremendously to get all your questions answered on your first visit!

Wish I could be more help on this one, but I just don't know.

Thanks JusticeForAll!!
You put my mind at least a little more at ease. I'm SO stressed out over all this. I stopped paying cc's in September to try and save up, so phone calls that are already bad are going to get worse!! Do you know anything about having credit cards that are with same bank as mortgage? They;re not under same loan or anything--I had all before we even refinanced. My mortgage is Citifinancial and I have a Shell, BP, Citgo and HomeDepot card that are financed thru Citibank.I also have 2 $500 regular Visa cards that are Citi. Will they foreclose on you if you get behind on accounts like that even though they are considered unsecured?I'm so upset about this whole mess I can't sleep!! All my thoughts are consumed by this! Thanks again for replying.

[CATCHMEIFYOUCAN]

Cross Collaterlization

Cross-Collateralization is a term used when the collateral for one loan is also used as collateral in a different loan. One example would be if a person owns a house but wants to buy a second house, that person can use the equity in their existing house as collateral for a loan on the new one.

The reason one property can be collateral in two different loans is related to another real estate term "Loan to Value," or LTV. This is the ratio of the amount borrowed against a property in relation to its value. For instance, a house that is currently valued at $500,000 with $200,000 debt has an LTV of 40%. This means the owner currently has borrowed 40% of the value of the property. Some or all of the remaining value can be used as collateral for another loan. Many lenders will loan up to 80% LTV or higher.

Credit unions are particularly adept at offering cross-collateralization clauses, also referred to as dragnet clauses, anaconda clauses, or future advance clauses.

When a credit union loans money to a consumer, the lender often seeks to protect its interest by having a borrower pledge collateral to secure repayment of the debt. Collateral is an asset pledged to a lender, until the borrower pays back the debt. In case of default, the lender has the right to seize the collateral and sell it. Sometimes lenders, particularly credit unions, insert cross-collateralization clauses to protect themselves against risk.

Catchmeifyoucan

[Jeepy89]

Cross-Collateralization -- we have this issue with our truck which we wanted to reaffirm with the credit union -- we had to reaffirm a credit card with them as well because the truck was used as collateral for it (even though we got the truck after the credit card). Our lawyer told us to think of it as one big loan and we would have to pay it all off in order to keep the truck (good thing that with the credit card and the remaining balance of the loan didn't exceed the value of the truck)

[SinkingFast]

Thanks JusticeForAll!!
You put my mind at least a little more at ease. I'm SO stressed out over all this. I stopped paying cc's in September to try and save up, so phone calls that are already bad are going to get worse!! Do you know anything about having credit cards that are with same bank as mortgage? They;re not under same loan or anything--I had all before we even refinanced. My mortgage is Citifinancial and I have a Shell, BP, Citgo and HomeDepot card that are financed thru Citibank.I also have 2 $500 regular Visa cards that are Citi. Will they foreclose on you if you get behind on accounts like that even though they are considered unsecured?I'm so upset about this whole mess I can't sleep!! All my thoughts are consumed by this! Thanks again for replying.

To answer your question simply,............. Citi could.

We don't really know. Depends on the terms of use agreements of the individual loans or Lines of Credit.

Dig out your Mortgage Instrument. Gather up all those "Terms of Service" statements from the CC's. Read thru them. See what they say.

When you Consult with attnys, this is definitely a question you should ask them.

[sarajd]

I don't have the original terms of service for cc's, but I had them years before we refinanced with Citifinancial--they were not our original mortgage co., they weren't even the ones we refinanced with--that company sold our loan to them about 3 months after we refinanced.I didn't sign anything with cc's to use anything as collateral--we didn't even own a home when I got them.I'm so confused!

[Interlaw]

Hi,
I posted earlier about a clause in our mortgage stating default if you file bankruptcy. No one responded and I don't go see Att. for almost two weeks. I was wondering if he advises me not to file ( I can't lose our home ) then what is the most used means creditors go after in recovering their money. All of my debt ( around $20,00 )is in credit cards but all are basically lower balances( I just have alot of them !!)The highest one is $1700, most are under $ 1,000, quite a few are $500 or under.We had to refinance last year to get a fixed rate so we have only around $ 5,000 in equity and only 1 year into 30 year loan.What exactly is a lien anyway?Will they make you sell your house or does it mean that if you do they get their money first? I work a part time job so the 25% they could garnish wouldn't hurt as much as something against house. I plan on getting husbands checks deposited in different account if I can't file, so if they want to freeze my account then fine--they wouldn't get much!! We don't live in community property state and all cards are in my name. Thanks, any knowledge would be appreciated!!!

Ipso facto clauses in mortgages--those saying there is a default just because you file for bankruptcy--aren't enforceable wrt the bankruptcy. You can cure mortgage arrearages through a Chapter 13, and so long as your payments are current, can keep it after a Chapter 7 (assuming the Trustee doesn't take it). I have never seen a lender foreclose because of the breach of an ipso facto clause.

Brett Weiss
[email protected]

https://www.brettweiss.com/bankruptcy

Maryland, DC and Federal bars
Member, National Association of Consumer Bankruptcy Attorneys

--> Read our Bankruptcy FAQ at www.brettweiss.com/bankruptcy/FAQ/br_faq.htmwww.brettweiss.com/faq/br_faq.htm.

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The Small Print: This response is for discussion purposes only.
It isn't meant to be legal advice and you shouldn't treat it as
such. If you want legal advice, speak with a local lawyer
familiar with your state's laws who can review *all* of the
facts and the law applicable to your situation.
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