Foreclosure University Blog

Question: My home in South Carolina is facing foreclosure, I live and work in Fl now. If my home forecloses and they file a deficiency judgment, if I don’t have the money, can they garnish my wages?

Answer: -If your home in South Carolina forecloses and they file a judgment against you, yes they can garnish wages.

Question: Looking at short-sale, foreclosure, or bankruptcy… only is Social Security Disability, VA Disability (100%), and disability insurance monthly payment… what should I do? can they come after any of my income in a deficiency judgement? will they even come after me? how will bankruptcy affect me… I currently have NO assets at all except for about 15,000 dollars in savings. thanks Tom from FLORIDA

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.

Question: My husband and I are in the process of buying our first home and we are very confused as to what is going on and no one can help us. Here’s the situation…We put in an offer on a house and the offer was accepted after negotiations. Within 2 months the house went into a short sale because the owners did not have the money. Since then (it’s been 6 months) Bank of America has reappraised the home and put it into foreclosure (or so I’m told). Our real estate agent said that they can get the foreclosure postponed…What does this mean? Can they foreclose on a house that has an offer on it? Would this mean that the contract is no longer valid? I would appreciate any help you can give us. Thanks!

Answer: -  It sounds like you made an offer to the bank for less than what is owed on the property, which is a short sale.  And from what you say, the bank accepted the offer but there may have been some other requirements from the initial seller in order to get everything approved.  As a buyer, it’s not uncommon to wait for MONTHS and if you are patient enough it could even be a year or more before you are able to buy a property in foreclosure.  This is all because of bankruptcies, settling with 2nd and 3rd lien holders, uncooperative sellers, etc.  To answer your question, yes, the bank can foreclose on a property even if there is an offer because they are waiting for certain requirements to be met.  Yes, they can postpone the foreclosure auction as long as the bank sees a legitimate reason to postpone.  Don’t give up.  Keep working close with your agent, I’m sure they are on top of the situation…Just don’t be surprised in you have to wait awhile.  Most home buyers get frustrated waiting and move on to another home.  Good Luck

Question: CAN FILING BANKRUPTCY PROTECT YOU FROM A DEFICIENCY JUDGMENT?

Answer: -Well for most people who go through a hardship like foreclosure, the main reason they file bankruptcy is because a judgment was filed against them.  And since they are not in a position to pay off their mortgage amounts, bankruptcy was their only option unless they wanted their wages garnished.  Bankruptcy can protect you from a deficiency judgment if you file before the judgment as well because that mortgage amount would be included in the bankruptcy.  Most people wait to file bankruptcy until after foreclosure because lenders have don’t necessarily have to file a judgment against the homeowner.  They can issue a 1099 which means the mortgage amount they forgave is considered as taxable income.  I would recommend you seek counsel from a professional bankruptcy attoney so you know all your options.  Good Luck

Question: My son is paying on his house that was foreclosed a couple/few years ago: why does this happen after someone has bought that house?

Answer: – Well it’s probably because he agreed to pay a certain amount over time to satisfy the debt.  It’s was either that or they probably told him they would file a judgment against him.  That’s my guess.

Question: MY PRIMARY HOME AND RESIDENCE IS IN CALIFORNIA BUT I OWN A APARTMENT COMPLEX IN ARIZONA. IF I LET IT GO TO FORECLOSURE, CAN THEY TRY TO TAKE MY HOME IN CALIFORNIA?

Answer: – No, unless you pledged it as collateral in order to qualify for your apartment complex.

Question: A bank that is foreclosing on a home holds a first and a second mortgage. The first alone is more than the home is worth. What will the bank typically bid at the sheriff’s sale? Would it bid market price minus second mortgage lien, because the buyer would still have to be paid off?

Answer: – Typically the opening bid is the amount you owe plus foreclosure fees, back payments, etc.  If someone bids at the foreclosure auction, then the highest bidder gets the property.  If no one bids, the bank takes back the property and sells it through a real estate broker.  If the bank does not get paid the full amount they are owed, they can 1099 you for the difference and count the loss as income to you so you have to pay taxes on it.

Question: I am confused if I will lose my house in Chapter 7 Bankruptcy as I am not understanding the Equity Exemption rule. My house is worth $230,000. I owe $105,000 on the first & $60,000 on a HELOC. I am unemployed and my unsecured debt is $60,000. If I file bankruptcy can the mortgage holders force me into foreclosure if I am up do date with payments? I am getting conflicting advice from attorneys.

Answer: -Unfortunately we are not bankruptcy attorneys so maybe someone else can shed some light on this topic.  I do know that a Chapter 7 is a wipe out and therefore you would liquidate all your assets to pay off all your creditors.  An attorney is hired to help “protect” those assets, like personal belongings. The trustee or attorney who represents the court and the creditors will look at all the assets (house, car, furniture, equipment) anything of value and decide what must be liquidated to pay some of the debt that was wiped out.  So depending on whether or not your home has any value, it would be in your best interest to find a good attorney or maybe even investigate different Chapters of bankruptcy’s to make sure Chapter 7 is the way to go.

Question: If I declare bankruptcy now with regard to my other debts, will it prevent the short sale from going through?

Answer: -No.  Bankruptcy only postpones an auction or short sale which buys you more time.  In fact, many short sale investors will use bankruptcy as an option if they need to buy more time so it doesn’t go to auction, as long as it’s in the best interest of the homeowner.

Question: I built a home in New York two and a half years ago for my daughter to live in. The mortgage and title is in my name only for a current balance of $147,000.00. My wife and I live in South Carolina. Our condo here is on the edge. We could probably sell it for what is owed. We also have a boat that probably has $30,000.00 in equity. Add in a Money Market Account with $35,000.00 and $60,000.00 in what were 401K’s but are now rolled into simple IRA’s. Credit card debt is about $10,000.00 Cars are bought and paid for. My daughter has not been able to make the mortgage payments for the last eight months. I have been making them, along with all of my own payments. It has come to the point where I am going to have to let the bank have the house back. I have about $50,000.00 wrapped up in the house, but when the bottom dropped out in rural upstate NY, it really dropped out, and I could not sell the house at this time.  If I let the house go into foreclosure, can they touch any of my other assets. My wife is co-signitor on the condo and boat, but again, not on the NY house. I have excellent credit, but I’m at the age where I seriously doubt that I will be making any major purchases any time soon.

Answer: -Can they come after your assets? No.  Because when you signed the paperwork, the bank agreed to loan you the money and used the house as collateral.  However, if you ultimately go through foreclosure, the bank has the right to file a judgment against you for the amount they lost.  So you are expected to pay the difference or in most cases people will file bankruptcy to eliminate the judgment.  By doing so would require you to sell some or all your assets.  So the best option is to work out a pay off or settlement with the bank for a fraction of what you owe on the loan.  This is called a short sale.  By having the bank approve a short sale and asking them to satisfy the loan, they give up their right to file a judgment.  You’ll also able to avoid foreclosure and possible bankruptcy.  Again the key here is to get them to “satisfy the loan”.  By doing a short sale, you’re also giving the buyer a good deal on a home that is upside down.  Now if you are successful in getting a short sale approved, more than likely they will just 1099 you for the difference.  But that’s a lot better than a judgment.  And there is a chance they won’t 1099 you either.