What happens if I stop paying my HELOC in California?
In Arizona, if you stop paying your HELOC, they can file to foreclose on your house. Usually, however, the HELOC is underwater and will get nothing in a foreclosure sale. If they aren't going to get anything in a foreclosure, they usually will not pay to force a foreclosure. Of course, the HELOC remains in full force. A bankruptcy may be able to strip the HELOC from your house and recharacterize it as unsecured. You should consider talking to an attorney in California to discuss your options.
Chapter 7 Bankruptcy Attorney
A HELOC is a loan secured by any equity in your house. So by law, the HELOC has the same rights to foreclose on your property if you don't make payments in the same way as your 1st mortgage can.
If you are underwater on your home even with your 1st mortgage, you might be interested in finding out about a program in Chapter 13 bankruptcy called lienstripping, which can remove the HELOC as a lien from your property & discharge the debt.
Check out the link below for more info & to watch a news interview on this topic.
Hope this perspective helps!
Debt Collection Attorney
The bank has the right to foreclose. They will foreclose if the property's equity is greater than the amount owed on the senior notes - your original mortgage.
In addition, there is a potential, and I stress only a potential, that after the foreclosure the bank may have the right to sue you personally for the amount of the outstanding HELOC.
Disclaimer of California Attorney
Although the above response is believed to be accurate, it should not be relied upon as any type of legal advice because the information provided is incomplete. It is intended to educate the reader and a more definite answer should be based on a consultation with a lawyer. No attorney client relation is formed with me without a written contract.
Joshua P. Friedman