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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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We took out a line of credit loan on our principal residence

Customer Question

We took out a line of credit loan on our principal residence in California. We stopped making payments in 2009 and have not made any contact since that time. California has a 4 year statute of limitations. Now that we are selling the house, this line of credit loan is asking for payment. What is my recourse?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 1 year ago.

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Expert:  CalAttorney2 replied 1 year ago.

Unlike other types of contracts, a contract secured by a Deed of Trust (such as your mortgage or equity line), which have a 4 year statute of limitations, Deeds of Trust carry a much longer 60 year statute of limitations, therefore the creditor can sue to enforce these for much longer.

Furthermore, simply because a lender cannot sue to enforce a contract (so for example if your loan was not actually secured by a "Deed of Trust" but was only secured by a "note"), does not mean that the note is unenforceable simply because the lender cannot sue to enforce the personal obligation. So when you sell or refinance the property, the loan must still be paid as part of the obligations being paid out of escrow.

So, when you go to close escrow on the home, this loan will need to be satisfied, your escrow company will contact this lender (in addition to any other lien holders, such as your primary mortgage holder) to get a payoff balance, and then send them funds to satisfy the debt.