Posted by JT - IN on October 07, 2001 at 14:15:44:
No, I am NOT saying that the Jr lien would become the Sr. lien at all. The BK of the Lender that you mentioned, would have not effect on the above scenario, nor the priority of lien position.
In a Judicial foreclosure, all parties having an interest in the property, are notified of the foreclosure procedings; whether they be 1st or 10th lien, federal or state tax liens, etc. This notice informs them of the procedure and a prudent lien holder will defend the priority of their position, by bidding accordingly. As in the example of, Predatory Lending, (I think I am familiar with this company, LOL), need not attempt to exert an position, as they are in the position they were recorded in, and that will not change, so a 2nd is a 2nd is 2nd. However, Predatory will have the right to bid, just as the 1st will have the right to bid, as well as any other lien, will have the right to bid. Following the sale, the proceeds are paid in the following manner: Property Taxes, The Clerk of Court, (Sheriff)for the cost of conducting the sale, then all other liens in the order that they were recorded, until the funds run out. Any lien holder not paid in full, is expunged and released. So with your example, the property sells for $ 90K, then Acme Lending, or their BK Trustee, will get whatever is leftover, after property taxes and expenses of the sale. Predatory Lending, regardless of the fact that they broght the action, will get nothing; (except the ability to write off the loss).
Hope this clarifies matters.
Just the way that I view things…
JT - IN