Will Bankruptcy Return Your Home?

After your foreclosure has been filed and completed, there is very little that filing for Chapter 7 bankruptcy can do to help you get the home back. However, a bankruptcy filing can be useful to you in other ways. Depending on your situation, you could have your mortgage deficiency wiped out.

Can Bankruptcy Return Your Home?

If the foreclosure has already happened, bankruptcy cannot help you. When you first file for bankruptcy, a stay is issued that buys you time to make a deal with the lender to keep your home. If you did not take advantage of this period and your foreclosure was completed, your home cannot be returned.

If you feel that the lender unfairly filed for foreclosure, your attorney can file a claim in the court against your lender. The lender could be subject to fines and payment for damages that you have suffered. 

What a bankruptcy can do for you is help clear up any deficiency that remained after the foreclosure was completed. 

What Is a Mortgage Deficiency?

When the lender takes back your home and sells it to the next buyer, the amount that it is sold for might not be enough to fully pay off what you owed to the lender. The lender has the right to come after you for the difference between the sale amount and what you owe. 

For instance, if you still owed $50,000 on your home and it sold for $45,000, the lender could file a lawsuit against you for the remaining $5,000. Legally, you would be liable for the $5,000.

What Can a Chapter 7 Bankruptcy Do?

If you file for a Chapter 7 bankruptcy after your foreclosure is completed, you can include the mortgage deficiency among the debts you owe. When the court discharges your other debts, the mortgage deficiency can be discharged, too.

No matter what the circumstances, once the court has discharged the deficiency, there is nothing the lender can do to try and collect on the debt.

It is important to note that when you file for bankruptcy, the bankruptcy trustee has the right to seize some of your assets and sell them to pay off debts. Check your state's laws to ensure that assets you want to keep are covered by state exemptions. The amount of the exemption varies by state. 

Losing your home can be difficult, but the experience can be made worse by dealing with remaining debts from the bankruptcy. For more information, contact the Legal Clinic Of Jerry Paeth or a similar firm.