Who is responsible for foreclosure debt

Often only the foreclosing lender attends, who bids no more than the balance of the debt. You can bid at the auction, but you will have to make an immediate down-payment and pay the balance within a short period of time. After a foreclosure sale you will receive notices about eviction. In most states the servicer must go through a separate court procedure to get permission to evict you.

Only a government official can carry out an eviction. The eviction consists of a supervised change of locks and removal of your personal property from the house. The Mortgage Deficiency or Surplus. Once a foreclosure sale is completed, pay careful attention to all notices you receive.

These may include notices of who bought the property and how much they paid. Always ask on your own who bought the property and the sale price because sometimes this information is not sent to you. You may also receive notices about the deficiency, including collection letters and court papers. In some states your deficiency can be limited if you act to protect your legal rights by responding to these notices or court papers. If you do have to pay a deficiency, this will be an unsecured debt like credit card or medical debt and it is thus low priority debt, until the lender sues you for that debt.

Because deficiency claims are unsecured debts, they can be discharged in bankruptcy. When these agencies seek a deficiency, they can seize your federal tax refund. But, even though the debt is owed to the federal government, you can also discharge it in bankruptcy. If they say you are entitled to a surplus, be sure to give them your new address when you move, so they can send you a check.

If the servicer does not tell you whether you are entitled to a surplus, send a Qualified Written Request to the servicer, as described in a prior article in this series. If fees and costs eat up your surplus, and they seem unreasonable, dispute them or even challenge them in court.

When threatened with foreclosure, immediately seek legal help. It is better to get this help too soon rather than too late. Free help may be available at a neighborhood legal services office go to www. A small number of lawyers in your area may handle foreclosure defense cases for a fee and many lawyers will help you file a bankruptcy. Exercise care in hiring a lawyer. The highest priced lawyer may not be the best. Find someone you feel comfortable with, at a price you can afford. Also try to get a referral for the lawyer from someone you trust.

Contact a local nonprofit housing organization to find out where this service is offered in your community or call TDD or visit www. Scams to Avoid. Some businesses offer help to people facing foreclosure in order to rip them off. A pending foreclosure of your home is public information and scam artists will find that information and then contact you. Scammers may ask for thousands of dollars, saying they are offering you a loan or have arranged a payment plan or loan modification.

In reality they will do nothing. Even worse, these scammers may even without you realizing it have you sign your deed over to them, with a bogus option to buy it back. If someone seeks you out to save your home, odds are the offer is bogus and will only get you deeper into debt and prevent you from taking the steps that will save your home or improve your situation. Requests for high fees or for money to pay the mortgage are another sign of a scam.

An offer of a new mortgage as a way out of foreclosure will be on terrible terms and will just make your situation impossible to resolve. If you do sign a new mortgage under pressure of foreclosure, you have three business days to cancel. Foreclosure can move very quickly, but you can exercise your legal rights to slow down the process.

Delay gives you time to put in place a long-term solution, such as to refinance your mortgage, sell your home privately, arrange a workout agreement or loan modification, or save up money to get you caught up on your payments. You cannot properly delay foreclosure just because you need more time. The actions you take must be based on some underlying legal claim or defense that is raised in good faith.

Procedural Defenses May Delay the Process. Lender errors can be to your benefit when you are contesting foreclosure, forcing the lender to start over or at least to comply with procedural requirements. You are likely to need the help of a lawyer or other professional to determine lender compliance with required procedures. Examples are failure to give you proper notice, failure to give you a fair chance to correct the default, failure to properly advertise the sale, failure to introduce the original documents in the foreclosure proceeding, failure to sue all the proper parties, failure to bring the foreclosure proceeding in the name of the real mortgage owner, or discouraging bids at the foreclosure sale.

There may also be procedural requirements that involve considering you for loss mitigation options. Under certain state laws you may be able to defend against a foreclosure if the servicer seriously violated these procedures.

In states where foreclosure actions are brought in court, raise defenses in that action. In states where lenders use the non-judicial foreclosure process, you have to bring a legal case of your own, asking the court to stop the foreclosure.

Courts may refuse to allow foreclosure if the servicer surprises you by suddenly calling the whole loan due when the servicer has been lenient in the past in accepting late or partial payments. It instead must warn you that late or partial payments are no longer acceptable before it calls the whole loan due and attempts a foreclosure. If the servicer accepts a payment after the foreclosure has started, you can argue that there is no longer a default, and the servicer must restart the foreclosure process.

This may involve giving a new notice of acceleration. Asking the Court for More Time. A judge may give you a delay if foreclosure will cause serious hardship. The hardship should be documented and involve more than just the loss of your home, such as that a family member has a serious illness. The hardship must be temporary as well; if permanent, the judge may feel that now is as good a time as any to allow the foreclosure. If you have a great deal of equity in your home, a judge may allow you a short period of time to sell the home without foreclosure, allowing you to get the best possible price and recover your home equity.

A chapter 7 bankruptcy case cannot address a foreclosure in the long term but filing the bankruptcy typically delays the foreclosure at least 60 days, as long as you have not recently filed another bankruptcy case. While the bankruptcy is pending, the lender cannot continue foreclosure without permission of the court. You cannot file a chapter 7 bankruptcy solely to delay foreclosure. You must have some other legitimate purpose for filing bankruptcy. For most homeowners in financial distress, this is hardly a problem because there are lots of other debts outstanding.

Unlike a chapter 7 bankruptcy that only delays a foreclosure, a chapter 13 bankruptcy filing may eliminate the threat of foreclosure by letting you slowly get caught up on past due payments over a period of years, while at the same time, you must continue to make your regular monthly payment. Do not file the chapter 13 bankruptcy too soon, and instead pursue options to modify your payments discussed in a prior article in this series.

But you definitely do not want to wait too long and certainly should file the chapter 13 bankruptcy before the foreclosure sale. You also need to leave yourself enough time to participate in required credit counseling with an approved credit counseling agency before filing bankruptcy.

Fortunately you can do this over the Internet or by telephone. Curing Delinquent Payments and Reinstating the Mortgage. Chapter 13 bankruptcy works best where you fell behind in your mortgage payments because of a temporary financial setback and you have resolved the problem that caused your setback. Filing the chapter 13 bankruptcy the same as in chapter 7 automatically stops the foreclosure—at least temporarily. In addition you can pay back your delinquent payments in installments over a period of three to five years, but you must also make your regular monthly payments as they come due.

You may have to pay interest on the back-due amount, a commission to the bankruptcy trustee for handling your payments, and certain fees the servicer has already charged, if they are legitimate. As long as there has not been a foreclosure sale, you can cure delinquent payments in a chapter 13 bankruptcy even if the servicer has already demanded you pay at once the full loan amount or even if a court has ordered a foreclosure sale. These defenses can be raised as part of the determination as to how much you have to pay under your chapter 13 bankruptcy plan.

Chapter 13 bankruptcy may also permit you to get rid of other liens and mortgages on your property. Sale of a Home in a Chapter 13 Bankruptcy. You can, however, use the bankruptcy process to sell the home on your own in an orderly fashion, thereby keeping your equity and avoiding the problems of a foreclosure sale.

Request that the court approve your realtor. When a sale is arranged, many title insurance companies require that you obtain an order from the bankruptcy court approving the sale and allowing the property to be sold free of liens. Several states and local court systems have created programs that offer settlement conferences and mediations for foreclosures. In both judicial and non-judicial states, the initial process is typically the same, beginning with your first late monthly mortgage payment.

First missed payment. The first step is a missed payment. Additionally, some lenders might report your late payment to the credit bureaus. Some lenders will consider you in default after 30 days of no payment, while others have a day no-payment limit. The default rules depend on your lender. The next step depends on whether you have a judicial or non-judicial foreclosure.

Typically, non-judicial foreclosures are faster and less expensive. Foreclosure lawsuit or notice of default. For a judicial foreclosure, your lender will file a foreclosure lawsuit. If you do respond, the case could go to trial or the judge could file a motion of summary judgment. In a non-judicial foreclosure, the lender automatically issues you a notice of default NOD via certified mail, which is also recorded with the county registrar.

This tells you how much you owe, including past due amounts, late fees and foreclosure costs. Once you receive the NOD, you typically have 90 days to repay what you owe or work with your lender to come up with a repayment agreement. Notice of sale. This notice might be published in a local newspaper and could also be posted on your property.

The lender will then prepare to put the home up for auction, which includes setting a date and time for the sale. Leave residence. Generally, you do not have to move out until the foreclosure process is complete, which can take a few months or up to a year or longer. However, once your house is sold, you have to leave the property.

You might have some time after the sale date to live in the home, but that timeframe varies by state. It could be a few days or a few weeks.

If you remain on the premises beyond your legal rights, the homeowner or lender will start a formal eviction process. If the sale of the home yields profits, the lender is not entitled to excess proceeds over the loan balance plus any fees owed for the foreclosure process. In short, any money earned above the balance and foreclosure costs goes to the borrower. In the event that your home sells for less than the balance owed, the lender can file something called a deficiency judgment.

This is a lawsuit that requests the lender pay the remainder of the loan amount. A lender might try to collect the outstanding balance. Some states, however, have anti-deficiency laws or restrict deficiency judgments after foreclosure.

Sometimes, the lender pays the taxes in order to sell the home. Taxes are attached to homes—not people—so once the property is sold the taxes are the responsibility of the new owner. Some states do not allow collections on payments made by lenders after a foreclosure. Up until the time your house is scheduled for auction, there might still be a chance to halt the foreclosure process.

The key is communicating with your lender. The sooner you talk to your lender, the better. Many people feel intimidated by calling their lender and would rather avoid this uncomfortable situation by putting it off, but that can only hurt you in the long run. Many states allow a foreclosing bank to get a personal judgment, called a " deficiency judgment ," against a borrower for the amount of the deficiency.

In many states, a bank can get a personal judgment a deficiency judgment against the borrower if a foreclosure sale results in a deficiency amount. Once the bank gets a deficiency judgment, the bank may use the judgment to go after Jonas' paycheck through a wage garnishment and bank account with a bank levy.

In other states, though, you don't have to worry about a deficiency judgment. Some states prohibit banks from suing for deficiencies under certain circumstances, like after a nonjudicial foreclosure. Loans that fit into this category are sometimes called "nonrecourse" loans. If a foreclosure is nonjudicial, the foreclosing bank must file a lawsuit following the foreclosure to get a deficiency judgment. On the other hand, in a judicial foreclosure , most states allow the bank to seek a deficiency judgment as part of the underlying foreclosure lawsuit; a few states require a separate lawsuit.

Many states have a law that limits the deficiency amount to the difference between the debt and the property's fair market value. Fair market value is typically determined by a fairly complex statutory appraisal process set out in the state statutes. You might be able to wipe out your liability to pay a deficiency judgment by filing for bankruptcy. While it might not make sense to file for bankruptcy just to discharge a deficiency judgment, if you're considering bankruptcy to deal with multiple debts—like credit card balances, unpaid medical and utility bills, and personal loans—consider talking to a bankruptcy attorney.

Deficiency judgment laws vary from state to state and can be complicated. If you're facing a foreclosure, it's important to understand how the law works in your state.

To find out more, consider talking to a knowledgeable foreclosure lawyer.