Homes Can Be Foreclosed, But Banks Can Come After You For Difference Without Chicago Bankruptcy

A recent Wall Street Journal article looks at deficiency judgments, which are court orders that banks can get to force homeowners to pay the difference between what the home sells for and what remains owed on the loan.

This is a terrifying prospect. A homeowner loses his or her job and is forced to stop making payments on a home they want to keep. The bank is unwilling to modify their mortgage, so they're stuck.
Without notice, some months later, they get a phone call or a letter. It's the bank telling them a judge signed off on a deficiency judgment against them. This is after the bank took back their house, sold it at auction for significantly less that what was owed, and now wants the difference in the loan paid to them.

This is happening with great frequency as banks are unable to cope with the losses from home loans gone bad nationwide. There are millions of homes in foreclosure and the losses for banks are staggering. But there is a solution -- bankruptcy in Chicago.

Under certain forms of bankruptcy, there are ways for people to hang on to their main house even if a vacation house is in foreclosure or has already been sold by the bank. Chapter 13 bankruptcy allows for people to make payments over a three to five year period in order to discharge all the money they owe. Other forms of bankruptcy allow all the debt to be removed without making payments.

Consult with an experienced Chicago bankruptcy lawyer if you find yourself in this position. Getting out of debt can be a monumental challenge and it's one that can't be tackled alone.

As lawyers have noted, banks have become more and more aggressive in seeking deficiency judgments. Rather than working with homeowners or cutting them some slack because of tough financial times, the number of deficiency judgments has actually spiked this year as foreclosures have increased. With real estate numbers slow to improve, analysts say it's likely that this strategy will continue to play out for banks who are seeking to get back as much money as they can after the market's collapse.

There are 40 states and the District of Columbia that allow lenders to sue borrowers for mortgage debt lingering after a foreclosure sale. Experts believe banks will use these laws to their advantage as their own companies continue to struggle financially with the rise of foreclosures nationwide. Most banks won't say why they choose to seek deficiency judgments against borrowers, but some say they do it when they suspect borrowers have stopped paying because of a loss of value, not because they can't afford payments.

But one strategy for these borrowers is to consider bankruptcy. If a consumer gets hit with a deficiency judgment, they can file for bankruptcy, which stops lenders from coming after them for that debt. By discharging that debt, the borrower can get away from a six-figure judgment hanging over their head.

If you need to speak to a Chicago bankruptcy attorney call the DebtStoppers Bankruptcy Law Firm at 800-440-7235 today for a free debt analysis. Call 800-440-7235.

More Blog Entries:

Opportunity to Consider Bankruptcy as Chicago-Area Foreclosures Increase: September 23, 2011

Chicago Foreclosures Get Cash Boost Under Mayor's Plan: September 2, 2011

Additional Resources:

House Is Gone, but Debt Lives On, by Jessica Silver-Greenberg, The Wall Street Journal

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