Foreclosure & Ch.13

[CantPayDBills]

After foreclosure when the bank auctions the house off, is the difference that they come after me for considered an unsecured debt since they already took the house back? Thanks!

[busbis]

I'm trying to figure out the same thing. I've heard that you can "surrender" your collateral and that alone would satisfy your claim, but then I've heard about this hanging paragraph that would state that they can come after the difference. I would love if anyone knew what this "hanging paragraph" means. I thought it only related to vehicles.

[Kentucky-BK]

After foreclosure when the bank auctions the house off, is the difference that they come after me for considered an unsecured debt since they already took the house back? Thanks!

Generally speaking, if a creditor with a mortgage forecloses on a house and the sales price in foreclosure for the house is insufficient to pay the mortgage debt in full, a creditor may pursue the individual for the balance of debt. The balance of debt after subtracting the proceeds generated by the mortgage foreclosure sale is generally referred to as a "deficiency balance". Usually, a deficiency balance is an unsecured debt. In some circumstances, such as if the creditor has another form of collateral in addition to the mortgage (like a lien on a car), the debt may remain secured.

On the other side, sometimes a house will sell in foreclosure for an amount greater than the amount of mortgage debt. In that circumstances, the individual may get some money back in their pocket, assuming that no other judgment lien holders, tax liens, etc., apply to the property.

[krielly]

Although a slightly different scenario, this post got me thinking about our Truck

We were paying for it outside of the plan, but it didn't run for months, and we couldn't afford to get it fixed (was gonna be around 2K.

We voluntarily surrendered it to the bank. Not sure WHAT it ever sold for....I'm sure it was less that we owed, as we didn't really have any equity in it, and that was with it running. Never heard a thing more, and the bank never filed a claim for the difference.

Interestingly enough, we have checking and savings accounts with the same bank, and they never closed our accounts. Still banking with them over a year later.

K

[diviaruba]

After foreclosure when the bank auctions the house off, is the difference that they come after me for considered an unsecured debt since they already took the house back? Thanks!

Any shortfall, if you are in a state which permits deficiency judgements, becomes an unsecured debt, and can be treated as such under a Chapter 13 plan. See here http://www.foreclosurelaw.org/ for a synopsis of foreclosure law for your state, and look under "Deficiency Judgements Allowed? Y or N".