AboutRegan Shinski Expertise I can answer questions on collections, repossessions, bankruptcy, credit repair, credit counseling, FICO scores, credit planning, and the cause and effect of credit related decisions. I can also answer questions on collection settlements and preparing to sue your creditors for false debts and credit reporting.
Experience Fifteen years ago I was financially devasted due to severe health issues. I filed bankruptcy, had a foreclosure, car repossession, tax lien, and ruined credit. I immersed myself in credit law. I settled dozens of accounts and had them removed to improve my credit. I personally sued four creditors and collection agencies and won cash settlements for their false reporting on my credit reports.
Since then, I have completely recovered and have nearly $100,000 in revolving credit lines and perfect credit. I have owned a credit repair company for the past five years and have an additional three years of specific work in the collections and debt management industry.
I am fully versed in the Fair Debt Collection Practices Acts (FDCPA), Fair Credit Reporting Act (FCRA), and have used them successfully in collection settlements and lawsuits for myself and others. I am also familiar with and abide by the Credit Repair Organizations Act (CROA).
I have deleted or helped delete literally hundreds and hundreds of derogatory items from consumers' credit reports and helped negotiate many settlements with collection agencies and creditors. I have also advised people on bankruptcy at any stage.
In the current credit market, I have successfully advised numerous people on how to obtain credit and how to negotiate for better terms.
Education/Credentials BA - University of Minnesota
Question I bought my house in 2001 for $265,000. When the infamous real estate boom was at its prime I made the terrible mistake of getting a home equity long for $130,000 and maxed out the line of credit. Now the value of my house has dropped to the original value and probably less than that. What happens to the home equity line that does not have a collateral support anymore? I am not thinking about bankruptcy but I am afraid that I will not be able to bring the price of the house to that level again. Is there anything that we can do?
Thank you
Answer Hello Alfonso:
I'm sorry to hear you and so many others are in a similar state with their homes. I'm not sure I fully understand your question or what you are contemplating doing.
If you get behind on your mortgages, the lender(s# can foreclose. These laws vary tremendously by state. The process can take from 2 - 24 months depending on state laws and other factors. The second mortgage holder alone can still instigate a foreclosure but, again, this may vary by state. Even if they don't force the sale of the home, they can go to court and get a civil judgement in some states. This stays on your credit report until paid and often longer #again, that state-by-state issue). The problem with this is not the house, but the fact that they can collect on it through more traditional means including garnishment of wages and collection of personal property - subject to many exemptions. If the home is sold or foreclosed, the creditors basically line up to collect the funds with the first position usually going to the first mortgage holder, then any subsequent lien holders falling in line.
Bankruptcy WILL be on your credit for 10 years and severely limits future credit options. Additionally, it limits your ability to get a job in some fields. However it CAN provide some protection including elimination of the second mortgage in cases like yours. This is EXTREMELY complicated and not a guaranteed thing. A LOT of things have to fall into place. Laws again vary by state so a consultation with a bankruptcy attorney would be warranted before such a life-impacting decision is made.
Better options in the short term are to negotiate with your lenders. Virtually all lenders are offering loan modifications. Some even offer principal reduction. At the very least, a lowered interest rate, deferred payments, extended loan terms all are possible options. In general, lenders would want to work with you in situations like this rather than foreclose because they would be left trying to collect or sell an upside down house. you should explore this before filing bankruptcy.
To specifically answer your question about the loan not having collateral support anymore, it doesn't change anything legally. The lien to the house is still there. The value of the house will probably change the decision making the lender does if you default, but from your standpoint, it really should not matter.
I hope this helps. Contact the lenders about a modification, then consult an attorney if that fails. In the interim, research the foreclosure laws in your state. It may be better to take a foreclosure, ride out the time, and move instead of taking a bankruptcy.
