Here’s a preview- sometimes filing Bankruptcy is your best option. Is it worth losing $xxxx/mo on that rental property to keep your credit free from dings/foreclosure? When should I walk? Should I try to do a Short Sale, or just completely walk away from my home and let the bank have it? How long will it take for my credit to recover from foreclosure? And finally- How do I repair my credit after the foreclosure sale?

I’ll be writing new articles on these topics soon. Stay posted, and don’t be afraid to shoot me an email!

Did You Read These?

• Quick Bankruptcy Insights
• Don’t Pay for Free Education!
• Another Satisfied Homeowner
• Can I Gut the House Before the Bank Forecloses?

"I hired a Lawyer to help me with my foreclosure. He told me that the Lender can sue me for any losses they incur from the foreclosure sale, and garnish my wages the rest of my life until they’re paid in full…"

My Response - "Not if it’s a standard mortgage used in the purchase of your home (ie- wasn’t a small business loan or otherwise some other very odd loan). If it’s a single family or two-family residence, and is less than 2.5 acres in size, they CANNOT COME AFTER YOU FOR LOSSES!"

"But my attorney said…."

ok- here’s the proof. I took this right from the Arizona Revised Statutes, word for word. Go there, read them all for yourself. You’re looking for Title 33, Chapter 6, Article 2.  You can go there and read them all, word for word, or- here’s the important ones below. This is PROOF that they cannot come sue you, under the ‘normal’ circumstance! Take these to your attorney, and ask him to explain them to you, and see if he STILL thinks that the lenders can come sue you. ;)  -Please note- there ARE situations where the bank’s can sue you for their losses. However, 98% of the homeowners are NOT in those situations. You would know it if you were (ie- took out a business loan on the property, property is a large piece of land, larger than 2.5 acres, etc etc).

33-729. Purchase money mortgage; limitation on liability

A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.

B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.

 33-730. Limitation on deficiency judgment on mortgage or deed of trust as collateral for consumer goods

A. If both a security agreement and a mortgage or deed of trust have been given to secure payment of the balance of the purchase price of real property and consumer goods or services or the balance of the combined purchase price of such real property and consumer goods or services, no deficiency shall lie thereunder if no deficiency would lie under the mortgage or deed of trust given under such transaction, notwithstanding any agreement to the contrary.

B. For the purposes of this section, consumer goods and services are goods and services used or acquired for use primarily for personal, family or household purposes.

Man, these attorney’s must REALLY hate me right now. I’m ruining their retirement plans.

Other Must Reads

• Another Satisfied Homeowner
• Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 2)
• Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 1)
• Quick Bankruptcy Insights

Many people want to sell the cabinets, doors, toilets, counter tops, etc to make some extra cash when they’re leaving. Here’s the problem with that- that is destroying the Bank’s collateral. They agreed to loan you money based off of the property’s current condition- and yes, they read the inspection report you got before they loan you the money. By taking that stuff out, you are essentially destroying their property value/collateral, and they CAN and WILL come after you later. They can sue you (and in some cases, find that you performed criminal activity and have you arrested), get a deficiency judgment against you, and garnish your wages until they recoup their losses. It’s not a pretty site to try to make a little bit of money. Contrary to popular belief, the bank owns your house until the day you pay off the mortgage (same with your car, for that matter). Yes, you may have TITLE to the house- but the banks OWN the house.

Here’s what I tell my clients- IF you are walking away, you can typically take your refrigerator (if it’s one you put in after you purchased- if it came with the home, LEAVE IT!) and washer/dryer. You cannot take: Stove, Dishwasher, Cabinets, Counters, Toilets, Sinks, etc. Do not trash the property when you leave, that is just a horrible statement of your integrity. Afterall, while you may be mad at the bank, you’re the one you agreed to make the payments and are breaking your agreement (in most cases). Leave the property in decent condition, take your personal belongings with you, and part your ways peacefully.

Other Must Reads

• Don’t Pay for Free Education!
• Update: Eviction Process is Now Faster than Ever!
• The Truth About Short Sales and How They Work in Arizona
• More Common Questions on Foreclosures in Arizona

Other Must Reads

• Can I Gut the House Before the Bank Forecloses?
• The Truth About Short Sales and How They Work in Arizona
• More Common Questions on Foreclosures in Arizona
• Another Satisfied Homeowner

While I strongly push the idea that filing BK is a bad idea for most people in foreclosure, there are some circumstances where it’s a great idea. For example- if you earn $60k/yr, and have $150k in credit card debt and are upside down on your property, it MIGHT be a good idea to file BK. However- I had a reader contact me from this site asking if they should file… they made $80k/yr, had $10k in credit card debt, and were currently employed. For them, I strongly suggest that they DON’T file BK. They can pay $10k off in credit card debt pretty quickly if they just restrict their lifestyles a bit.

In the first scenario, it could take 10-15 years to pay that debt down. That’s years of stress, bad credit, lifestyle impact, etc. You have to make a decision whether or not it’s worth it to you. You can file BK, be free of your debt and have your credit cleaned up within 2-3 years at the most, if you’re diligent about it. Bankruptcy is a right we have as American Citizens, it’s there to be used for a specific purpose. Using it for the right scenario can be very worth while. Obviously, the key here is to learn from your mistakes and make sure you don’t get into that same situation again.

Remember, filing Bankruptcy doesn’t save your home. It merely pauses the foreclosure process for a month or two. 98% of the bankruptcies I see filed from people in foreclosure ultimately end up losing the home anyways. The kicker is not only did they lose their home, but now they damaged their credit for the next 7-10 years to boot.

Other Must Reads

• Foreclosure & Bankruptcy Lawyers LIE!!!
• Another Satisfied Homeowner
• Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 2)
• Filing Bankruptcy Won’t Save Your Home From Foreclosure in Arizona! (Part 1)