After mortgage foreclosure they can still come after you

I hear from people who are very very frustrated and they will often say that they are simply going to walk away and let their house go to foreclosure sale.

This is not the best course.

I am always urging people to deal with foreclosure situations so that they don't go through to the foreclosure sale. The reason for this is that in many cases your lenders can pursue you after the sale and make life difficult for a long time.

There are several scenarios where this can happen.

First, if you have two mortgages. The first mortgage may be doing the foreclosure. Once the house goes to auction, the second mortgage gets wiped out. But the law is generally that the second mortgage holder can still sue you for breach of contract. They will probably win a quick summary judgment. And now you have a judgment against you that can drag you into bankruptcy.

Even in bankruptcy, you may have to pay this judgment over 3, 4 or 5 years, or at least part of it. Because many people don't qualify for a chapter 7 discharge so they are stuck in chapter 13 which requires years of court supervised repayments. You may be eligible for a chapter 7 though…if your income falls below the median income of your state or your debts exceed a certain threshold.

But you don't want to have to go there, right?

The second scenario where you could face more jeopardy after the foreclosure auction is in states that use a mortgage process rather than deed of trust process. A mortgage usually requires judicial foreclosure. A state like Illinois comes to mind. The lender can come after you in many instances for their financial losses and after the foreclosure sale, they don't have to do anything more. They have a judgment entered against you.

In any situation where someone has a judgment against you they can haul you into a hearing and require you to bring financial documents, lists of your jewelry and bank accounts and valuables, and just about anything else they care to ask of you. And you have to go and answer their questions. It's a mess.

The best way to avoid this is to not just walk away. Do a short sale. Negotiate with the lenders. Get help if you need it. But don't ignore this situation and let it just go…because more and more, it will come back to bite you.

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After mortgage foreclosure they can still come after you

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11 Comments on After mortgage foreclosure they can still come after you

Short sale specialist California @ 9:56 am (Pingback)

[…] Can lenders come after you later for their financial losses in California? […]

Rob Miller @ 11:51 pm:


I live in Ohio and have 2 mortgages on one home (rental but still 500.00 short on mortgage payments). Been waiting for values to came back. And live in another home with one mortgage and been working 2 jobs to pay the mortgages for 4 years and I am tired. If I dont rent it I cant make mortgage payments and with a renter in it cant sell it. I am very happy in the home with the one mortgage. But cant get any real solid advice on what to do. I have spoken with the second mortgage and they are willing to lower payments down 200.00 less then what i am paying for the first 12 months That I think is because im behind in payments. The first mortgage dont seem to want to work with me . And im in good faith with them.

What should I do Let the property go back to the banks.

Maybe you can help me.


P.S. And really i feel the banks created this monster by flooding the market with new homes with no money down and were young couples really should be buying older homes with no money down allowing the equity of the older homes for those people wanted to upgrade to buy the new homes.

Richard Geller @ 12:50 pm:

What you want to do is a short sale, Rob. You can do this yourself by finding a buyer whatever the market price is, and then getting your mortgage holders to agree to the short sale.If they do not agree, you might have no choice but walk away. It gets old after awhile.



Steve Pey @ 4:33 pm:


I live in Arizona and have a first mortgage for $300,000 and and a home equity line of credit that I used to purchase the house for $56,000. Unfortunately, my house is now worth $190,000. My wife wants to quit her job and we won't be able to afford our current mortgage payment. What shoul we do?



jim @ 5:21 pm:

I say screw the greedy banks. They screw the people over and over with their greedy lobbyists and dirty filthy congrssman in their left pockets allowing the banks to wrongfully charge us people outrageous fees and get away with it. I call it legal extorsion and wish banks would fold.

Kerry @ 1:27 pm:

I owned a home and had 2 mortgages on it and the bank foreclosed. Well the second mortgage is the only one on my credit report with an outstanding balance due but the home sold for way more than both mortgages together can they come after me to pay the second mortgage of $22000.

How do you know how much the home sold for?

Have you contacted the lender on the second and asked them for proof you owe them anything?

That's what I would do.



Janet @ 3:23 pm:

I own my house with two mortgages. I'm three months behind on my 1st and one month behind in my second. I'm so tired of strugging to make my house payments I bit off more than I can chew. I tried to motify my mortgage with my 1st lender but they turned me down saying I don't have a hardship. Everything has
gone up like gas food electric cable etc. My net income per month is 3748.00
but my house payments total 2200.00. I try to explain to them that I can't afford
my house. They said only thing I can do is do a repayment plan by making my house payment will go up 350.00 extra per month. I lost my job Nov 2007 and was in bankrupty in Feb 2008. I don't know what to do I live in Maryland.
I received a intent to foreclosure. What can I do? Please help me.

Lisa @ 9:06 am:

We own a home in Southern CA and owe just under $600,000 for it. The first is $410,000 and the equity loan is tapped out with the balance. At the time we had taken the equity out the value was around $750k, now we'd be lucky to get $300k for it. We are only 10 yrs away from retirement age. I don't believe we'll see the value go up enough in that time and we can barely make the payments at this time. We had planned to sell it after we made improvements that we used the equity line for. Now that's a pipe dream (we had wanted to move out of the area). We have tried to re-negotiate our loan however they say we make too much money and are not in a hardship situation (it sure feels like we are). The 1st & equity is through the same lender "CHASE". We have talked about walking away from it but are concerned we'll never be able to own another home and that they can come after us for part of the mortgage and/or equity. We have perfect credit at this time but it is becoming more and more difficult to meet our monthly obligations. Any advice or suggestions out there?

Bubba Shocks @ 8:58 pm:

I tried HARD to get a modification with Indymac; two loans 80/20 both with Indymac. I sent 5 requests and hired a lawyer to deal with them. I bought the property in 04. I'm a freelance musician and for the last 20 years my income has steadily risen despite politico-economic sea changes. Because of the current
economic climate I've seen a completely unprecedented decline of 60% in my income from 07 to 08 and I need help to keep the place. I originally bought what I could AFFORD, not what was offered to me, which was considerably more. I wasn't greedy and I understood my loan.
Fast forward; no help, period; loan mod declined as I made too much to qualify (not true).
Value of property is currently $60k; loan is $193k. When I started to make enough money to qualify this last year (09) for a loan mod: 40% less than what I was making from 2000-2007 they said I made too much!! I couldn't afford their forbearance terms and I don't qualify for chap 7 to protect myself. They will probably serve me with a suit for the junior loan. What in the world can I do; I have a new baby daughter and my wife and I are stuck in between, possibly having to pay for years on nothing! I know an investment may bottom out for long periods of time and I was fine with enduring that; as long as the bottoming
out didn't create a recession that gutted my income by over half. I've never seen this happen in 20 years I've been working in my field. What do I do?

Phillip Morris @ 10:26 am:

We have a loan with Chase as well, and no second on the home. We have an offer at $144,000 on a house that we owe, with all the fee's etc $190,000 and CHASE will NOT take it. They are not willing to take less than $155,000.

I believe banks are out to get as many people as they can. We paid on the house for over 8 years. At $145,000 they have still made money.

The house is in MI. Do Michigan laws protect the home buyer from the bank filling a suit for the difference?

Liz @ 11:34 am:

If you own a second home outright and it is now your primary residence, can the bank come after your current home apart from a lien or judgment for the difference your 1st property sells in a short sale?