Has your home been foreclosed upon? Before taking any action or inaction, learn more about foreclosure from our Baltimore bankruptcy attorneys. If your home has already been foreclosed upon, there may be significant legal problems coming your way.
Typically, when a borrower has significantly defaulted on their mortgage loan, banks will normally foreclose on the borrower's loan and sell the borrower's property at an auction in an attempt to recoup some of the monies it is owed. That borrower is then legally responsible for the difference between the foreclosure sale price and the amount still outstanding on the mortgage loan. This difference is known as the mortgage deficiency balance.
In addition to seriously damaging your credit, the foreclosing bank then generally has the legal right to pursue the borrower for this deficiency balance. In most cases today, this deficiency balance can be significant. Because of the turmoil wrought by the Great Recession, more and more lenders are exercising their legal rights and pursuing defaulting borrowers for their mortgage deficiency balances owed after foreclosure. To get their money, banks can seize wages, garnish bank accounts and place liens on other assets held by debtors.
These mortgage deficiency balance recoveries have risen 48 percent to a record $1.01 billion in the first nine months of last year compared with the year-earlier period, according to the Federal Depositor's Insurance Corp. (FDIC) that tracks the amounts recovered by banks after mortgage loans are written off. Recoveries on defaulted home-equity loans just about doubled to $392 million from the same time period, the FDIC data shows. This data does not reflect, however, money recovered by trusts that own mortgage backed securities or collection agencies that make money by buying bad debt and acquiring the rights to collect mortgage deficiency balances.
Deficiency judgments in the 15 years prior to the Great Recession were rare. Banks saddled with a very high volume of foreclosures haven't had the time or the resources to begin collection activity on the deficiency balances that have accumulated since the start of the recession.
Quickly but surely, however, that trend is definitely changing and it may signal the next personal financing crisis for middle class Americans that used to own a home. The likeliest candidates to be pursued for deficiency balances are the homeowners that simply walked away from their homes because they were so under-water (owing substantially more to the bank than what their home was actually worth) that they had no hope of ever breaking even on their investment.
Many times a person can file a bankruptcy to eliminate these deficiency balances. This avenue is often the best course for a person in this situation as the bankruptcy not only replaces the foreclosure notation on a person's credit report to one of a discharge status, but also eliminates the possibility of being sued for the deficiency balance.
Do you think you are the only one contemplating bankruptcy? Think again! Hundreds of thousands of people are running to the Bankruptcy Court seeking refuge from collector activity, judgments, garnishments, and a slew of other collection tactics. Right now, people are suffering through financial hardship typically caused by diminished income, increased expenses, medical calamity, unemployment, and other financial setbacks that are rendering them unable to continue making their mortgage, car and credit card payments.
Many times, if a person could simply eliminate their credit card debt, they could channel those payment savings towards their other high priority monthly bills. Most times, a person in this situation simply needs to take a breather from the monthly stresses of making the minimum payments on their unsecured credit card debt balances and to channel those funds towards their mortgage and/or car payments. Oddly enough, many people are religious in making their monthly minimum payments, but when the balances on those credit card debts never decrease, what is the sense of continuing to make those payments at the expense of saving that money towards your children's college expenses or paying your mortgage payment?
Many times a person can file a Chapter 7 bankruptcy to eliminate these debts. Other times, a person may be forced to file a Chapter 13, whereby the person would be required to pay back a percentage of what is owed, but at the same time consolidating their monthly payments into one easy payment and denying the ability of their unsecured debt from accruing interest during the course of the case.
Although specifically each person's case presents different facts, if you are deep in debt and see no way out, educate yourself about the bankruptcy process as it may help you get back on track and change your life for the better. Our Baltimore foreclosure attorneys are here to answer your questions and get you started on the path to financial stability.
Contact our legal team at (410) 234-0100 to learn more.