My former residential property was inPA. The bank in Second position was actually the primary lenderFlagstar. The bank in first was the Heloc lender PNC. Flagstar foreclosed and took property, refusing Shortsale. I had a buyer for 80k. Owed 115k on primary and 71k on Heloc. House has not been sold. Now PNC is demanding payment. When we lost the house it was a primary residence. We now live in NY. Flagstar did not coordinate with PNC, the first position lender. I have no assets but do not want personal bankruptcy.
1 Answer from Attorneys
What is your question? The foreclosure by Flagstar would have wiped out the second heloc. However, nothing stops PNC from suing on the note, not the loan. If PNC sued, they would probably sue you in NY. I am not licensed in NY but if PNC gets a judgment against you then they will be able to garnish your wages, seize your bank account or any other assets.
Why do you think Flagstar was obligated to coordinate with PNC? It wasn't. There are rules governing mortgage foreclosure and as long as PNC was properly notified that is the extent of the coordination needed. i don't quite understand how your primary mortgage lender Flagstar managed to be in second place. That makes NO sense. Foreclosure by a junior lienholder does not wipe out a first mortgage.
I would take a wait and see approach to see if PNC really sues you. If and when they do, that is the time to file bankruptcy, depending on what they want. While you say you have no assets, a judgment would allow PNC to garnish wages or seize bank accounts. And judgments last a long time - 20 years for personal property. You owe a big chunk of money and bankruptcy will be the most viable option. However, if you have the funds, the HELOC can be settled for something less than what is owed, maybe 25% - 30%.