2nd home gone back to bank...what now?

[sillywalks]

My 2nd home was a home my ex and I owned together that I refinanced into my name only on the hopes of repairing and selling. On Tuesday of this week, it went up for auction on the courthouse steps. It did not sell, but I was told the bank took it for $134K -- but the bank already owned it, so what does that mean, exactly?


I spoke with a representative at the bank who told me I could cancel my Fire insurance (Investment property insurance). I sent an email to get that O.K. in writing -- any reason not to do this?

The representative also has told me in the past that this bank ALWAYS pursues any deficiency, and that my file is already marked to pursue the deficiency once the house is sold. This bank policy is why I am planning on filing for bankruptcy. Do I need to wait until they actually get a judgement against me, or if I file before that happens can any future deficiency be dismissed by going through Chapter 7? It could take quite a while for the bank to sell the house.

Thanks for any input!

[justbroke]

The bank "pays" market value at the auction so that they know what the market value is. The bank gets "funny money" that is basically your balance of the mortgage. If you owed $200K, the bank has $200K to "play with" (bid with). This keeps someone from getting the house real cheap! (Noting that banks may have a certain amount they are willing to lose and will just let the home go, at auction, for a price below the balance owed.)

Please know that the bank NEVER EVER owned your home. You did. The auction is the legal way (in most States) for the bank to take the property your pledged -- the home -- as security for the loan your took out!

I would not cancel any insurance until you are sure that the property has been retitled into the bank's name (or some other entity/person's name).

File bankruptcy whenever you are ready. It won't matter if you file now, as to the deficiency, as your "debt" to the bank would be discharged. Just make sure you use this strategic tool, Chapter 7 bankruptcy, the right way, because it's a one shot deal every 6-8 years!

[goodyphilips]

I also agree that it is not prudent to cancel your fire insurance at this juncture and you should also wait for bankruptcy option as it should always be your last resort.