What are the implications if my mortgage is foreclosed on?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
What are the implications if my mortgage is foreclosed on?
I am in the process of filing Chapter 13 bankruptcy. The payment plan that the lawyer has given me is more than my disposable income. I am now checking to see if foreclosure is a better option for me. I am unable to agree to a payment plan that I am unable to make. What are my options. He says I don’t qualify for Chapter 7.
Asked on December 21, 2011 under Real Estate Law, Texas
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
1) First, of course, if a home is foreclosed upon, you lose the home--the bank (or whomever bought/owns your mortgage) will acquire ownership of the home.
2) There will be a substantial negative impact on your credit rating; while the credit rating agencies keep their formulas close to their vests, conventional wisdom is it hurts your credit almost as much as bankruptcy does, but for not quite as long.
3) In most, but not all states, if the mortgage is "underwater"--you owe more than the home is worth--the lender can sue you for any remaining balance left after the foreclosed home is sold. For example, say you owe $300k on a home now worth $255k; if the home brings in $255k at the foreclosure auction or through a private sale after foreclosure, the bank could, in many states, sue you for the remaining $45k (called seeking a "deficiency judgment").
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.