Posted on: 25th Nov, 2009 08:43 pm
We had our chapter 7 bankruptcy in California discharged in Feb of 2009 and our credit report says both our first and second mortgages were included. Both lenders or banks have a notice of discharge on file (I called). We didn't reaffirm our loans. Our second loan wasn't used to purchase the house, it was taken out years before the bankruptcy and it was included as I stated above. We wanted to try and stay in the house so we continued making payments until thru October 2009 (7 months), but now after a job loss we can no longer afford the payments. My two part question is can we still walk away, and if we do and the bank starts foreclosure proceedings can we be held liable for any of the debt stemming from the foreclosure after our chapter 7 bankruptcy? Thanks for any information.
Hi dabeyta,
Since you have been discharged from bankruptcy, you are no longer personally responsible for the mortgage debt. However, the mortgage lien is still on the property and if you default on the loan the lender will start foreclosure proceedings. The lender will not be able to come after you for any deficiency from the foreclosure because you do not have any personal liability towards the mortgage any more. The mortgage is secured only up to the current value of the property and the lender will have to remain satisfied with whatever proceeds they get from the foreclosure sale.
Since you have been discharged from bankruptcy, you are no longer personally responsible for the mortgage debt. However, the mortgage lien is still on the property and if you default on the loan the lender will start foreclosure proceedings. The lender will not be able to come after you for any deficiency from the foreclosure because you do not have any personal liability towards the mortgage any more. The mortgage is secured only up to the current value of the property and the lender will have to remain satisfied with whatever proceeds they get from the foreclosure sale.
Thank you for the great info, that's what I thought but I wanted it confirmed. One other question, since I am friends with my neighbors and they really don't want an empty house next door, is a short sale a bad option? I understand now that I can just walk away with no responsibilities, but at least if I short sale the lenders can get some of the debt back and my neighbors won't have an empty house. I guess what I'm trying to say, other than thinking of others (bank and neighbors), is a short sale a reasonable option for me?
Hi dabeyta!
Welcome to forums!
I don't think short sale is a bad option. The credit effect would be less if you short sale the property. It will lower your credit score by 75-100 points. Whereas in foreclosure or bankruptcy, your credit score would be reduced by 200-250 states. However, in case of a short sale, the lender will be able to sue you for the deficient amount resulting from the sale of the property. If you can afford to pay off that amount, then you can go for it.
Happy Thanksgiving Day :)
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I don't think short sale is a bad option. The credit effect would be less if you short sale the property. It will lower your credit score by 75-100 points. Whereas in foreclosure or bankruptcy, your credit score would be reduced by 200-250 states. However, in case of a short sale, the lender will be able to sue you for the deficient amount resulting from the sale of the property. If you can afford to pay off that amount, then you can go for it.
Happy Thanksgiving Day :)
Feel free to ask if you've further queries.
Sussane
So you're saying if we short sale the lender can sue us for the dificient amount even though we filed chapter 7 bankruptcy and both loans were discharged?
Opps, I forgot to log in, the above post is mine.