The threat of foreclosure does not happen overnight. For most homeowners in distress, payments have been late for at least several months-and possibly more. A loss of income is usually the cause, due to a life event that was almost certainly unexpected and even catastrophic in nature. Medical bills and illness may have completely turned your life upside down, and may have been coupled with the inability to work. With other outstanding debts like credit cards, student loans, and more, suddenly it may be impossible to make ends meet-and especially if other major issues arise such as divorce or unemployment.
Consult with an Experienced Foreclosure Attorney
After the endless worrying, the sleepless nights, and the stream of phone calls and mail from debt collectors, you may be considering several different options-along with just walking away from your home altogether. The first and most important step though is to speak with an experienced foreclosure attorney who will be able to review your case, answer all your questions, and help you move forward in the best way possible. This is not the time to go it alone. (See our recent blog, ‘Why Should I Hire a Foreclosure Defense Attorney?’ for more information on that topic.)
Consider All Your Options First
If your lender is threatening to foreclose on you, there are options such as a strong foreclosure defense, loan modification, and more. You could explore trying to sell the home outright, offering it in a short sale, or ask for a deed-in-lieu, where you basically hand the keys back to the lender, hoping for as little consequence as possible in comparison to an outright foreclosure. There may be some instances where it just makes sense to walk away though-even if you could struggle through making future mortgage payments.
Foreclosure May Have Serious Consequences
While most of us have had the unfortunate experience of watching an asset depreciate (cars come to mind immediately!), this is very serious when it happens to your home. Meant to be a long-term investment, if your home has depreciated to the point where you are hopelessly ‘underwater’ – owing the bank far more than the home is worth now – you may decide to walk away.
There are serious consequences to this which you must weigh out seriously. The black mark of a foreclosure will be on your credit report for up to seven years, making it difficult to open new lines of credit or buy another asset such as a car or home. Your credit score will also take a big hit.
There is also the possibility that the lender will sue you for the money they lost in the foreclosure sale. If they lost $25,000 in the sale, they could pursue you for that amount in court and be granted a deficiency judgment. While a poor credit rating is one thing to consider, a large deficiency judgment is another altogether.
You may also need to consider the tax penalties of walking away. It may be tempting to go ahead and default in the moment, but make sure that when tax season rolls around you will be able to handle penalties associated with any forgiven or canceled debt from the foreclosure.
Call Us Now for Help
If you are worried about foreclosure or have already received a notice from your lender, it’s time to get educated about your rights and your options. Contact Levitt & Slafkes, P.C. now so our foreclosure defense attorneys can review your case and help you move forward in a way that suits your needs best. We are here to help!