If I foreclose on a house, do I have to claim bankruptcy?

Answer 1

No. Foreclosure means you didn't pay the mortgage and the bank takes the title to the house away from you. If you owe more than the house is worth, they will come after you to collect.

Bankrupcy is when you declear you can not pay the debt because you don't have the means. You can either be forgiven of your debt or have a court mandated structured payment to satisfy the debt.

Quite often, one follows the other, but they don't have to be.

Answer 2

You can use a chapter 11 reorganization as one method to halt your foreclosure proceedings. They'll generally let you add the past-due payments to your BK repayment schedule. This can work, as long as you can begin paying your mortgage on time afterwards, on top of whatever the BK plan requires.

There's also the risk of getting sued for the bank's losses. It's also possible there's tax implications if you did a cash-out refi and never paid the money back (could be treated as income!!!). A chapter 7 liquidation will generally wipe these out.

As always, consulting an attorney in your area is advised, as foreclosure laws do vary by state. And BK laws, even though they take place in federal courts, have historically varied by state when it comes to housing. That may have change 18 months ago when they did the sweeping BK law changes, but the only way to know for sure is to consult an attorney. You can usually get a little time for free on your first consultation.

Answer 3

Bankruptcy could be necessary here if there is a deficiency judgment and if the creditor seeks to pursue you to collect it after the foreclosure.

Answer 4

You dont have to, but you will owe whatever amount they did not get for the house. i.e. you owe 100,000, they only get 50,000, you legally owe them the $50,000 they lost. If you file a bankruptcy, this amount will be dischargeable.

Answer 5

No. These are two completely separate things.

Answer 6

no