Losing your home and going through a foreclosure can be a stressful time. Unfortunately, more and more people are facing this crisis as the recession, unemployment and business failures continue.
However, many people may feel a sense of relief when they finally give up and move. They may be thinking that the worst is behind them and now they can pick up the pieces and put their financial lives back together.
But it doesn?t always happen that way. In over 30 states throughout the U.S. including Florida, Texas and Nevada, the lender has the right to put a deficiency judgment on the borrower. If the home happens to sell for less than what is owed, either at auction or even in a negotiated short sale. Many former homeowners have been unpleasantly surprised when this happens and it may not happen immediately. For example, in the state of Florida the lender has the option to wait as long as five years to file the deficiency.
Within five years, you may have been able to turn your finances around completely and getting a deficiency judgment at that time can really put your finances back into a tailspin forcing you to pay up or file bankruptcy, thereby prolonging your credit problems.
Lenders are inconsistent with this also. One lender may not do anything while another lender always reserves the right to pursue a deficiency. Also, now many lenders are checking credit reports to make sure that the default was not strategic, meaning that the owner walked away even though they may have been able to make the payment. In this case, if you are late on all of your bills you are better off than if you are only late on your mortgage.
Check the laws in your own state. If you are having trouble with other bills and you are considering filing bankruptcy, make sure that you and your attorney are aware of all of these implications of your foreclosure before you file.
See You Lost your house but you still have to pay.