How best to protect your other assets when there is a foreclosure?

UPDATED: Aug 4, 2011

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How best to protect your other assets when there is a foreclosure?

My mom signed a loan for a house for my sister and brother-in-law. My sister lost her job and can’t pay for the loan and it might be going into foreclosure. My mom also has a house that she lives in which is 3 payments away from being paid for and would like to know how to protect her home and herself from financial ruin and loosing her home.

Asked on August 4, 2011 Iowa


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Your mother needs to consult an experienced real estate attorney about the loan that she signed for a house that your sister and brother in law purchased. The issue is to determine what type of loan was acquired forthe house. Meaning, is the loan on the home that your sister and brother in law obtain the loan for the property's purchase?

If so, then the loan is what is called a "purchase money" loan. The significance of a purchase money loan for a home intended to be occupied by the borrowers is that in many states there are anti-deficiency statutes on purchase money loans where if the home is foreclosed upon and sells for less than the amount owed on the loan, the lender cannot come after the borrowers for a deficiency judgment.

Potentially your state may have anti-deficiency statutes on purchase money loans. If so, and the home that is about to be foreclosed upon that your mother signed the loan on may be a "purchse money" loan.

Good luck.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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