What to do if a bank is suing us after foreclosing on our home?

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What to do if a bank is suing us after foreclosing on our home?

..When we buy our home 8 years ago, we only had 10% of the house price ($389,000) so the bank representative asked us to apply for an equity loan of $38,900 so the dow payment would add up to a 20% down payment. However, after 5 years because of financial hardship, we could no longer pay the mortgage payments. So the bank foreclosed on our home. Now they have filed tin small claims court for for the equity loan of about $40,000 (including interest and fees). What should I do? Do we still need to pay the equity loan? Today we on food stamps; we only make about $3000 a month and pay rent of $1400 per month. We’re trying to support 3 kids under 11 years old.

Asked on January 11, 2013 under Real Estate Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Unfortunately, since--from what you write--you are suing for a separate loan (the equity loan of$38,900, not the mortgage, which was foreclosed upon), it appears that the bank may legally sue you for this  money--the foreclosure, based on the mortgage, would not affect the bank's right to be paid on the equity loan. Your financial hardship  does not affect the bank's right to sue you--obviously, if you simply don't have money, it may not be able to collect much from you, but if you do have at least $3,000 of work income per month, the bank may be able to garnish your wages, levy on your bank account(s), or execute on personal property (e.g. vehicles) you own. Espcially if you have other debts you have not been able to meet (e.g. medical bills, credit cards, etc.), you may wish to consider bankruptcy as an option to discharge your debts.

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

I suggest that you consult with a real estate lawyer as to what needs to be done as to your situation. If the loan that you received was a purchase money loan (original loan) that you are writing about regardless of position then the lender should be barred from pursuing the action under your state's anti-deficiency laws.

Note, your state may also bar a nonjudicial foreclosure deficiency per statute even if the loan your have written about was not purchase money.


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