The loan was an 80/20 through chase. The Heloc is for $22,000. They are offering to settle but we don't have any money to pay them. If we don't settle, Can they still sue us?
Real Estate Attorney
My initial question is, if the loan was 80/20, was your HELOC used to purchase the property?
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Yes, the critical question is really the nature of that 80/20 loan ... was it a purchase money second or was it cash taken out after the purchase of the home? Was it refinanced, etc.
If this really is a purchase money loan, there is a strong likelihood that they cannot collect anything from you at all. I have dealt with several lenders where one "kindly" worded letter was all it took to help them realize that they could not pursue the homeowner. I strongly suggest speaking with an attorney and determining whether or not you really owe anything. It would be sad to see you agree to pay a few thousand dollars if you owe nothing.
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Chapter 7 Bankruptcy Attorney
I have had this situation come up before. The case law says, it does not matter what the bank calls the loan - it is essence of the loan that matters.
If the essence of the loan is purchase money - meaning money that purchased the house and land (not improved) - then you will be protected.
I have never have it go any further than an exchange of letters.
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Please contact me directly with document for a free 30 minute consultation to get more concrete advice. This is not legal advice. I don't have enough information to give actual legal advice. I can only take the limited information presented and provide a framework to know how your situation may turn out. I may have questions that bring up issues you did not think were important but make a big difference.