Many homeowners think once the foreclosure process ends, that’s the last they will hear from the banks that owned their mortgages. Unfortunately, that’s not always the case: sometimes banks will pursue homeowners for what’s called a mortgage deficiency. Here’s more information about deficiency judgments and how filing chapter 7 in St. Charles, MO bankruptcy may eliminate this problem.
Mortgage Deficiencies
When a bank forecloses on a property, it tries to sell the home as soon as possible to recoup its losses. If the home sells for less than what the former owner owed, the leftover balance is called a mortgage deficiency. For instance, if the homeowner owed $200,000 but the home sold for $175,000, the bank could hold the homeowner liable for the remaining $25,000.
In Missouri, mortgage lenders are allowed to sue homeowners for this money regardless whether the home was sold during a foreclosure sale, short sale, or handed over to the bank in a deed in lieu of foreclosure deal.
Once the lender obtains a judgment for the unpaid balance, it can use a variety of collection tools to get the money owed including garnishing the person’s wages, putting liens on other property owned by the person, and getting a court order to deduct money directly from the person’s bank account.
How Filing Bankruptcy Can Help
Filing chapter 7 in St. Charles, MO bankruptcy can prevent this type of debt from haunting homeowners who have lost their houses in foreclosure proceedings. This type of bankruptcy wipes out the person’s responsibility for the debt, and the bank is prohibited from attempting to collect the money once the person receives a discharge from the court. Short of actually paying the money, this is the only way to completely eliminate the risk of getting sued in the future for the deficiency.
It’s important to deal with a mortgage deficiency before the bank places liens on other property. While filing chapter 7 in St. Charles, MO bankruptcy will get rid of the debt, it may not eliminate a lien. It’s best to discuss the issue with an attorney such as Van Dillen & Flood P.C. to maximize the benefit received from petitioning the court for bankruptcy. Click here for more about chapter 7 in St. Charles, MO.
