I have a Home Equity Line of Credit (HELOC) and the property securing it is no longer in my possession and I still have a high balance. They received the payoff request and left the line open and now I am in trouble. What can they do to collect the debt? I am nervous.
I encourage you to consult an attorney in your state regarding this matter. Bring your loan documents, records of payments, and any collections notifications you may have received. An hour's worth of an attorney's time is not cheap, but the advice you gain will be relevant for your state and unique circumstances, and may end up saving you a lot of money and possibly avoiding a judgment.
Generally speaking, just because a loan is secured on a property does not necessarily mean the creditor will attempt to foreclose on the property. Home equity lenders and second mortgage holders frequently choose to pursue a standard lawsuit to obtain a money judgment rather than proceeding with foreclosure action. These types of loans are considered "junior encumbrances" to your first mortgage, and in order to foreclose, these lenders are required to pay your first mortgage off before auctioning the property. Depending on the amount of your first mortgage and the amount that the lender can obtain for the property at auction, this type of foreclosure can actually cause a home equity or second mortgage lender to lose money.
Even if the creditor does not foreclose, and they sue you and obtain a judgment against you, the creditor may be able to garnish your wages, levy your bank accounts, or attempt to seize other property you own. The consequences of a lawsuit can be serious, even if the lawsuit does not result in foreclosure, so I would encourage you to take steps to resolve this debt as quickly as possible. You may want to set up a payment arrangement with the creditor, or you may even want to consider filing for bankruptcy protection. Again, these are options you will need to discuss with your attorney to determine which possible solution is the best for your situation. For more information about bankruptcy, I encourage you to visit the Bills.com Bankruptcy Information Page.
If you would like to read more about foreclosure action, and for options available to consumers facing foreclosure, visit our Foreclosure Resource Page.
I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.