What Happens to a Line of Credit in Foreclosure?
Full Question:
Answer:
Priority of liens is generally determined by the date of recording. Often, the lender will have priority over any later filed liens (junior creditors), and the liens junior creditors hold will only be able to be collected out of any remaining proceeds after the mortgage holder is paid. If the property securing the mortgage is sold in foreclosure and no proceeds remain to pay junior creditors, it is possible the junior creditors could attach other assets of a judgment debtor. A property owner with a loan secured by the property who applies for a second mortgage to make additions or repairs usually must get a subordination of the original loan so the new loan has first priority.
The answer will depend on the nature of the foreclosure, such as whether it is for taxes, and the date of the mortgage's filing in the county recorder's office. If the judgment is for property taxes or other money owed to the government, it may take priority even if filed after the lender's lien. You may call the land recorder's office in the county where the property is located to inquire about filing dates.
