Read More from: Delaware Bankruptcy Litigation
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A creditor who conducts a non judicial foreclosure of its security interest cannot collect anything more than the property it forecloses on.Foreclosure is, as lawyers say, an election of remedies. When the lender chooses to foreclose, it gives up the right to pursue the borrower for anything more. But, the typical foreclosure sale destroys all liens on the property that are junior (inferior) to the foreclosing creditor. The HELOC lender, the second deed of trust, the SBA loan are rendered unsecured by the sale. Even though they no longer have a lien on the foreclosed property, those cut off lienholders CAN sue you for what’s owed on the debt. The exception is the California purchase money rule: If the junior lien secured a loan used to acquire a property you used as your home when you bought it, the lender cannot pursue you personally. The limitation on purchase money lenders suing you personally is often called the “antideficiency” statute.
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