If I quit claim deed my house to the bank, can the bank make me pay for any balance owed if they sell they it?

Question

This property is located in Wisconsin, and this house was used as collateral for my business, can they also come after my business?

Answer 1

Yes they can. They can not only come for teh money you owe on the house, but demand that the business loan be immediately paid in full as you no longer own the collateral.

Answer 2

That will depend upon your mortgage agreement. If your mortgage is "without recourse" then they cannot go after you for any shortfall. Some states mandate all residential purchase money mortgages are without recourse, CA is one such state. (However, even in CA, if you use your home as collateral for a loan other than purchase money such as a business loan, the non-recourse requirement does NOT apply as a matter of law. Your loan agreement would determine if you had any other liability.)

If the mortgage contract is "with recourse" then they can go after you for any shortfall.

One warning, though. If the bank cancels any outstanding debt after the foreclosure process (and quitclaiming it to them IS a foreclousure) you may have a taxable gain equal to the amount of the cancelled debt. Unless you are insolvent at the time of the cancellation, you may have to pay tax on the cancelled debt as if it were ordinary income.

Answer 3

It is called "deed in lieu of foreclosure". Was the mortgage company made aware that the funds were being used for a business? You may want retain an attorney to protect your rights.

Answer 4

I would not want to find out after the deed was done. Why not call and ask them, to be sure. Have a great day.

Answer 5

yes. think of it like a car loan. you can turn over the car to the bank/dealership if you can't afford payments, but you still owe that amount you agreed to. you'll be lucky if they stop with the quit claim.