John Sells to Beth Property Which Has a $150,000 Mortgage

question 42

Essay

John sells to Beth property which has a $150,000 mortgage in favor of Avco Bank. Beth purchases the property subject to the mortgage. The value of the property declines and there is a default on the mortgage. When Avco Bank forecloses, the property sells for only $130,000.
a. Can Avco Bank recover the $20,000 balance from Beth ? Explain.
b. Can Avco Bank recover the $20,000 from John ? Explain.

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Definitions:

Capital Balances

The amount of funds contributed by owners or the net assets available in a business after liabilities have been subtracted.

Net Income

The amount of earnings after subtracting all costs and expenses from revenue, including taxes and other deductions. Representing a company's profit over a specified period.

Monthly Weighted

Refers to averaging or aggregating financial or statistical measures over a month with differing weights applied to the data points, taking into account their relative importance or volume within that period.

Admittance

Refers to the permission granted for entry into a system or location, or in electrical engineering, it’s the measure of how easily an alternating current flows through a conductor.