Question

30.Bill defaulted on a loan to Bank which financed the Bill’s auto. Bank was listed as a lien holder on the auto title. Who, if anyone, gets paid prior to Bank if the Bank forecloses its lien by selling the auto?

Answer 1

Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property.Therefore, through the process of foreclosure, the lender seeks to immediately terminate the equitable right of redemption and take both legal and equitable title to the property in fee simple. Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue homeowner association dues or assessments.

In the above case,as bill defaulted on a loan to bank which financed the bill's auto.Bank gets paid first if the bank forecloses it's lien by selling the auto.