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When does statute of limitations start running on foreclosures in NY?

White Plains, NY |

If payments haven't been made on a home equity loan in over 6 years, and the lender hasn't filed for foreclosure yet, are they now time-barred from filing suit? (No acceleration letters sent either.)

I'm familiar with Khoury v. Alger and other cases, where they discuss statute of limitations (SOL) applying to payments that were due within the past six years, etc. And I understand that filing suit accelerates the debt, which starts the SOL clock.

But if the lender never accelerates the debt by filing suit, does the six year SOL start running from the date of default? Or when they file suit?

It seems like the SOL on credit card debt starts when there's a default on the last payment. Wouldn't the same apply to home equity loans? (If not, why not?)

Thanks!

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Attorney answers 1

Posted

I wouldn't be concerned about your HELOC (Home Equity Line Of Credit) bringing an action of foreclosure against you, as they are 2nd position lien holder. If they are competent in the least, they will file for a money judgment, which will still attach to the property in New York State automatically, and then they will have the ability to seek an income execution and potentially pursue your wages and/or bank accounts.

You should contact a local bankruptcy/debt relief attorney as soon as possible before any action begins so that you have the maximum amount of time to plan your strategy moving forward.

If the value of your home is less that the payoff of your primary mortgage alone, through a chapter 13 bankruptcy petition you can move the court to remove the HELOC completely, and possibly modify your primary mortgage at the same time. Start with a CMA (Comparative Market Analysis) from a local realtor, or a BPO (Broker's Pricing Opinion) from a local real estate broker (should be free, don't let anyone charge you, they are very easy to do) so you can show your attorney and they can give you the best possible legal advice. Then you can make an informed decision on how you want to move forward.

Asker

Posted

Thanks very much for your thoughtful reply! Actually, I suspect the servicer is going to file suit, because the same servicer just lost their case against us on the 1st mortgage. Plus they just sent a Default Letter yesterday, and filed an assignment (bogus) a few months ago. The property is definitely underwater. I suspect that they'll try to foreclose on the 2nd just to try to collect something on the 1st, since it's the same servicer. And no, they've proven to not be at all competent! :-)

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