As a Virginia bankruptcy lawyer, people ask me almost every day, do I need to file bankruptcy after foreclosure?
When I try to answer that question, we look at the credit reports. Usually, the first mortgage shows “foreclosed” with a zero balance. Does that mean you are safe? Does that mean you don’t owe the money any more? Most people think it does.
People ask me almost every day, do I need to file bankruptcy after foreclosure?
Yesterday’s Washington Post has alarming news. Lots of people, in Maryland, are now getting sued. Getting sued on these first mortgage deficiencies.
I first wrote about this three years ago. Back then, I said I had almost never seen it. But I was worried that Fannie Mae, the bailed out mortgage giant, put out a press release in June 2010, saying they were about to start.
That was three years ago. I still haven’t seen much sign of it–until this Washington Post story.
Now I’m worried. In about half the country, the mortgage lender cannot come after you for a deficiency. When they take your house, that’s all they can get.
But they can in Virginia. And Maryland. And in Maryland, at least, they are starting to.
The Washington Post points out this long delay, suing years after the foreclosure, may be the mortgage company’s strategy.
If they sue you right after the foreclosure, they are pretty sure you are broke. So filing bankruptcy after foreclosure could be easy. (As easy as bankruptcy ever is–it’s never any fun.)
After a few years, you might be back on your feet. Good credit and a good job, again. Then they sue. And then they figure maybe you can’t file bankruptcy after foreclosure. Maybe, just maybe, you’ll have to pay.
(PS. This is about first mortgage deficiencies. Did you have a second mortgage on a house that went to foreclosure? If you did, you will get sued. You can count on it.)