Castle Law Office Blog | Missouri & Illinois Bankruptcy Legal Blog

Do You Have to Pay Back Your Mortgage After a Foreclosure?

While I try to help as many people as I can avoid foreclosure with Chapter 13 bankruptcy, there are still some folks who think that it will cost them less money to surrender their home. And it seems like they are right. After all, doesn’t the bank just take your home and call it even? Not necessarily.

If your home has been auctioned and sold at foreclosure, the creditors still may come after you. You can be held responsible for a deficiency balance—the difference between what you owe on the home and what it is sold for. For example, a man owes $100,000 on his mortgage. He lets his home go to foreclosure but it only sells for $75,000 at auction. That man is now not only without a home, but he also owes his creditors the remaining $25,000 difference. The creditor can and will file suit, obtain a judgment and can levy your bank account or garnish your paycheck.

Letting your home be foreclosed on can actually leave you in a worse situation than you were in before. It’s no wonder that I’ve had more and more calls from folks hoping to stop their foreclosure. If you are facing a foreclosure, you would be well-advised to contact a bankruptcy attorney immediately to prevent entering a situation that has ruined many people’s lives.