Monday, January 2, 2017
Does Foreclosure Wipe Out My Mortgage Loan?
For homeowners that have not made their mortgage payments in a while, the possibility of a foreclosure is very real. A foreclosure is an action by the bank to take back possession of a house and resell it to recoup some of the loss for the defaulted loan. Many times the homes are sold at public auction, for much less than what is owed. This causes the problem of having a deficiency amount due, and the chance that the lender will still look to you for payment. It can be shocking to be kicked out of your house, and then also asked to pay for part of the loan. Most people who are struggling with their finances are not in a position to come up with a large deficiency sum to get the mortgage lender off their back, but that does not mean you are stuck with having to pay the balance of your mortgage loan.
While a foreclosure does not wipe out your mortgage loan in full, if the home sells for less than what is owed during the foreclosure process, you can avoid being held liable for the deficiency balance by filing for bankruptcy. Here is how bankruptcy can help eliminate a mortgage deficiency:
● The deficiency balance is a debt you owe, and when you file a bankruptcy case you will include all of your debts in the case. Including the deficiency balance will mean that balance is discharged upon successful completion of your bankruptcy case.
● If the mortgage lender has filed a lawsuit to collect the deficiency balance, that lawsuit will be put on hold when you file bankruptcy.
One thing to watch out for on mortgage deficiencies is a situation where the house went to foreclosure as a result of a divorce action. Usually one party or the other is ordered to pay the mortgage in a divorce, and letting the house get foreclosed on can leave the non-liable spouse holding the bag for the debt. But if you file bankruptcy, you can avoid having to pay a large deficiency.
For more information about bankruptcy and how it can help you erase mortgage debt, call us today or reach us online at www.law-ri.com. We have multiple locations to serve you and can schedule a time to meet at the office most convenient for you.