Final answer:
Back child support payments take precedence over other unsecured debts when distributing remaining equity after a foreclosure and bank payment. They are considered a legal obligation, and they must be paid before the former homeowner can claim any remaining funds.
Step-by-step explanation:
A person facing foreclosure who has filed a claim of exemption under the homestead act may have certain debts that take precedence over others when it comes to the disbursement of remaining equity after the bank is paid off. Back child support payments are typically considered a priority debt, and as such, they will be paid before any remaining equity is returned to the homeowner. This is because child support payments are a legal obligation that takes precedence over unsecured debts such as credit card debts, past due car payments, or unpaid orthodontist bills.
Using the given information as examples, if Fred's house is valued at $200,000 and he owes $180,000 to the bank, his equity would be $20,000. If Freda's house is valued at $250,000 and she owes nothing to the bank, her equity would be $250,000. Similarly, if Frank's house is valued at $160,000 and he owes $60,000 on his loan, his equity would amount to $100,000. In each instance, after the bank loan is satisfied, priority debts like child support would be paid before the owner receives any remaining equity. If a person facing foreclosure files a claim of exemption under the homestead act and there is remaining equity in the house after the bank is paid off, the debts that would be paid before the owner receives the remaining equity are:
Credit card debts
Unpaid orthodontist bills
Past due car payments
Back child support payments
These debts would need to be settled before the owner can receive the remaining equity from the house.