Brother and investor settled out of court on some monies owed by investor to brother. To secure this debt brother placed liens on several of investor's properties. One such property is being foreclosed on and expected proceeds of $30k are gone be paid to brother.
Question: will these proceeds go towards the original debt?
Brother's atty says no because those $30k are not coming from debtor at all.
This fact pattern isn’t clear. Ask your brothers attorney who knows the details
We would need a little more context on the underlying debt and situation and would need to read the settlement agreement. However, on the surface, I would say that attorney's position is the more tenuous of the alternatives. I sort of see the point the attorney is making, but I don't buy it.
If I understand the situation. Brother and investor settled a debt (a claim). Let's say they settled for $90,000. As part of that settlement, the two agreed to allow brother to place voluntary liens against various real properties of the investor. The liens are placed against the "equity" of an asset owned by investor to secure payment of the debt. It is still the investors equity interest that is being used to satisfy the brother's lien. How that equity is liquidated (foreclosure sale vs. regular sale, etc) wouldn't, in my opinion, create any meaningful legal distinction. The brother doesn't have a property interest in the real property above and beyond the lien that secures the claim against the investor. I am hard pressed to see how proceeds from a lien that secures an antecedent debt could not be applied to that debt. If lien proceeds don't apply to the debt, that implies some sort of additional claim or property interest, which in this context, doesn't make sense.
The thing is, to actually do anything about it, if the brother won't concede the point, the investor will need to go to court. The devil in this situation could reside in the settlement agreement.
This question is unclear because you don’t say which lien is being foreclosed on. If the senior lien on the property is being foreclosed then the “voluntary lien” as you put it will be a sold out Junior. No money will come to the holder of the sold out junior lien.
I'm not sure what you are asking, so I'll state a general concept which may apply. In a nonjudicial foreclosure, all perfected liens are paid in order (starting with the first) and any remaining surplus funds go to the borrower.
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