Legal Question in Bankruptcy in Florida
Bankruptcy-Home Equity Line of Credit
My brother and his wife are filing for bankruptcy as their primary home is in foreclosure. The title of the home is held jointly.
Two years ago, the wife applied for a HELOC against the home with me as a co-signer. The line is fully drawn. What are my responsibilities to the bank now that they've filed for bankruptcy? Should the sale of the home not be enough to pay the first mortgage and line of credit, am I liable to the bank for the difference?
3 Answers from Attorneys
Re: Bankruptcy-Home Equity Line of Credit
A co-maker on a loan bears the responsibility to pay Bank if the maker defaults. Bankruptcy is a default on a loan. Bank can indeed come after the co-maker in the face of the maker's bankruptcy.
The sale of the home will pay first to the primary mortgage. Only when that balance is paid in full will proceeds be applied to second mortgages such as HELOCs.
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Re: Bankruptcy-Home Equity Line of Credit
The bank could indeed come after you if your sister-in-law defaults.
In order to preserve your credit, you will want to make sure that payments are made to the bank until the loan is paid off.
If the sale of the home is not enough to pay off both mortgages, you would be liable for the difference.
Re: Bankruptcy-Home Equity Line of Credit
The bank would have recourse to pursue you for any unsatisfied loan amounts plus fees and costs.
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