Bankruptcy Law/Equity loan


To whom may advise us...
When we buy our home in Massachusetts 8 years ago, we only have 10% of the house ($389,000) and wells fargo rep. ask us apply equity loan $38900 put in down payment add up to 20% down payment.  
after 5 years because our financial hardship, we can no longer pay the mortgage payments, and wells fargo foreclosure our home. now they file to small claim court for for the equity loan of about $40000 (incl. interest and fees).

May I ask what should I do? do we still need to pay the equity loan?
Today we on food stamp and because we only make about 3000/mt and have 3 kids under 11 years old, paying rent of 1400.00 /mt.  

Thank you,  HC

I do not believe that they filed in small claims court, because the maximum amount of a claim there is $7000.  You may want to check again.  Obviously, $40,000 is  serious matter.

In some states, a foreclosure on real property bars a later action on a debt secured by the mortgage.  In other words Wells could not sue you for additional money, even if at foreclosure the bid was less than the amount owed.  If Massachusetts follows that rule, then the "equity loan" might be considered part of the loan to purchase the property, even if they were separate, because the equity loan was needed to buy the property.  But this is a complex issue and you would need legal advice, which doubtless you cannot afford.

If the action for the equity loan is not defended, then Wells will get a judgment against you, and that would ultimately required you to file bankruptcy to get rid of the judgment.  You did not say what other debts you might have, but it sounds as though you should at least consider bankruptcy, and your questions about the equity loan could be raised with your bankruptcy attorney.  

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Michael T. Hertz


I am already listed as a volunteer under "Collections Law," but actually I am a bankruptcy lawyer. I am a member of bar in California and in Massachusetts and have practiced in bankruptcy since 1978 and have also taught bankruptcy law at the law school level (in Maine and Oregon). I can answers questions with respect to all bankruptcy chapters, having represented creditors, debtors, trustees, creditors committees, and persons involved in defending actions in bankruptcy court.


See above. Basically, 33 years of experience.

inactive member of State Bar of California; inactive member of bar in Massachusetts; former member of bar in Maine; former conseil juridique in France.

California Bankruptcy Law Review; Georgetown Law Journal; numerous others. See my resume.

Harvard Law School, J.D.; Pomona College, B.A.

Awards and Honors
Superlawyer in Northern California, 2005 and 2006

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