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How do creditors get paid when foreclosing on a house to satisfy unpaid debts?

A foreclosure is where the creditor collects its lien by forcing a sale of the debtor's real property. The creditor receives the amount of the proceeds from the sale equal to the unpaid debt plus expenses incurred in collecting the debt. Any other creditors there may be would receive their share of the proceeds and any remaining proceeds go to the debtor. Priority is the order in which creditors receive proceeds from the foreclosure sale. The lien held by the bank that provided a first mortgage to purchase the home is usually the first in line having priority in the sale proceeds. If the foreclosure is a result of a creditor enforcing a judgment, that creditor may still be second in line behind the first mortgage holder in receiving proceeds from the forced sale. The manner in which mortgage foreclosures are handled vary form state to state. In some states, a creditor may foreclose a mortgage without going to court while in other states it requires a complex court proceeding.

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