What are the effects of a foreclosure?

UPDATED: Jul 27, 2011

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What are the effects of a foreclosure?

I’ve been 1 month behind on my mortgage due to a child with cancer, and so have not been able to work for 2 years. I rented my home during that time. Now I’ve moved back in and was given 60 days to get a new roof or no insurance. My credit obviously stinks and I have no money. How long will it effect the chances of purchasing another home, and how long will it effect my credit on other purchases like a vehicle? What are the legal ties to the loan after a foreclosure? Can a person claim bankruptcy on a home? If so, what are the future effect if that happens? In other words, which is the lesser of 2 evils?

Asked on July 27, 2011 Oklahoma


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

1) A foreclosure does not legally prevent you from purchasing a home or obtaining a mortgage--or other loans, such as for a vehicle--thereafter, though it IS a major negative impact on your credit. While the credit reporters do not publish their formulas or criteria, common wisdom is that it reduces your credit score by around 200 points, decreasing the chance of getting credit, reducing the amount you'd qualify for, and increasing borrowing costs. LIke most negative information, it will affect your credit for 7 years.

2) Your state appears to allow "deficiency judgments," which means that if your home is foreclosed on, if then, when sold at bankruptcy, it does not bring in enough to pay off the whole amount of the loan, the lender can sue you for the remaining balance.

3) You can't file bankruptcy "on a home"--bankruptcy affects all your debts, including the mortgage. However, you have NO right to keep the home without paying the mortgage. While there are various wrinkles depending on the type of bankruptcy (e.g. Chapter 7 vs. Chaptger 13) you file, the short answer is you can keep paying the mortgage and keep the home, or you can give up the home and discharge the mortgage debt, but you can't do both.

4) Bankruptcy affects your credit about as much as a foreclosure according to most reports--maybe a little bit more--but stays on your record for 10 years, not 7.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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