Question about forclosure and equity line

[mountanddo]

A friend of mine has gotten notice that his house will be sold at a sherrif sale on December 7th. He has an equity line from the same bank that owns his mortgage (Wells Fargo). If the house goes to foreclosure what happens to the equity line? He has stopped paying for both as he has been unemployed since the beginning of June.

He believes that the equity line will go away because the house was used as collateral on the loan.

My thought is that once the house is foreclosed on he will have to file BK in order to discharge the debt from the equity line.

Does the equity line then become unsecured credit once the house is gone or is he right that it goes away with the house?

Edit: Just as a side comment...it seems that he just stopped paying the mortgage in June and the equity line about 2 months ago. From all I've read this seems awful fast for the house to already be in a sheriff sale December 7th when I've read people have been in their house for up to a year and nothing has happened yet with them. Did he just get unlucky?

[ValleYum]

Nice, plain-English article about this topic here: http://homeguides.sfgate.com/happens...sure-3111.html

[mountanddo]

Thank you! It seems that I was right and he isn't going to take that very well.

[mountanddo]

So what exactly drives the foreclosure process. As I said, it's only been four months and it seems that they are right on top of it with the sheriff sale.

He lost his job due to the fact that one of his co-workers threw a firecracker into a bathroom that he was working in and shut the door. He now has permanant hearing loss due to that. He explained to the bank that he has his Work comp hearing on December 20th. His attorney is trying to get his medical bills paid but is not confident that he will get lost wages or pain and suffering. I guess I don't understand how work comp can take responsibility for the medical bills but not be responsible for the resulting lost wages and pain and suffering. Unemployment won't get involved until the work comp is settled so he has no income.

I fear I'm not getting the entire story....

[Isobel]

Hi mountanddo -

Yes, I believe you're right and he's wrong. I'm in California and my second mortage could only be wiped out if I filed for bk, which was sort of the tipping point in deciding to file. Didn't want the $35K hanging over my head for years to come. I did a lot of research before I made the decision to file ch 7 (discharged just last week) and at least in California there's a 3 (or is it 4?) year statute of limitations during which your second lender can come after you. They often wait til 1 month before the s.o.l. is up because they think you might have some cash.... Not good...

Hope that helps! Or at least, your friend knows what he's dealing with - it could be different in your state, though...

Isobel