How We Can Help you

Bankruptcy Blog

Library

What You May Not Know about Letting Your Home Be Sold in Foreclosure in Missouri and Illinois

If you’ve decided to give up your home in a foreclosure, you may be thinking that you can finally relax. Unfortunately, that isn’t necessarily true and what is even more unfortunate is that most people don’t know about it. A foreclosure doesn’t always mean that you are free from your mortgage debt.

There could be a balance leftover from your mortgage even after your home is sold called a deficiency balance. A deficiency balance is the difference between what you owed to your mortgage lender and what the home was actually sold for. In this economy, deficiency balances are bigger and more likely to happen. Why? Often when people bought their homes several years ago, they were worth more. Now, since home values have declined, you are likely to owe more on your home than it can actually be sold for—and you will owe that balance to the mortgage company.

If you do owe a deficiency balance, not only will you not have a home, but you will also be facing a collection from your lender. They can get a judgment to garnish your wages or go after your other property to sell and help pay back the deficiency.

You may be saying, “Ok, James. I know about the deficiency balance. But, if I can pay it back, isn’t it worth it to just give up my home?” Of course, the value that you put on your home is completely up to you. I’m not talking about the monetary value—I’m talking about the value of a place you’ve raised your children, made wonderful memories, and invested your time and energy into. But, aside from the intrinsic value, there is another problem that many don’t foresee.

What does a foreclosure do to your credit report? While the insurance companies keep their methods a secret, having enough late payments or no payments at all to get to the point of foreclosure certainly has an effect on your credit report. An actual foreclosure, though, shows that you did not take responsibility for your financial future and is reflected on your credit report as so. In fact, many lenders have admitted that they are more likely to loan to a person with a bankruptcy on their credit report as opposed to a foreclosure.

A foreclosure, without more, tells the lenders you just chose to walk away and ignore it. Not a very responsible decision. On the other hand, bankruptcy can still help you if you need protection from foreclosure or even if your home has already been sold. This shows creditors you have taken a responsible alternative to make sure the debt is taken care of. Chapter 13 bankruptcy in Missouri and Illinois can stop a foreclosure dead in its tracks. Even Chapter 7 bankruptcy in Missouri and Illinois can help you eliminate the deficiency balance and rebuild your credit to reflect how responsible you really are. Want to know more about how Missouri and Illinois bankruptcy can help you? Request my free book, “Get Out of Debt: Secrets Your Creditors Don’t Want You to Know,” that I’ve written from my 15 years experience as a St. Louis Missouri and Fairview Heights Illinois bankruptcy attorney.

Got A Question?

News

FAQs