What is the personal impact of defaulting on a mortgage? 14 Answers as of May 27, 2011

My house is worth less than my mortgage. If I default on the mortgage, can I keep my personal assets and credit cards? What other options do I have? Thank you.

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Saedi Law Group
Saedi Law Group | Lorena Saedi
If you default on your mortgage of course your credit will be affected. Depending on the state which you reside the mortgage company may seek a deficiency judgment against you as well. Please also be aware that if you credit takes a hit from the default other credit lines will most likely be reduced by your other creditors since they all have access to a network to know when your credit is affected by default.
Answer Applies to: Georgia
Replied: 5/27/2011
Robert Peters, P.A.
Robert Peters, P.A. | Robert L. Peters
That is a wide open question. If you default on a mortgage the creditor can hold you liable. Bankrutpcy is an option do discharge unsecured debt and to surrender secured debt. You are entitled to keep certain property but you really need an attorney to sit down with you and go over exemptions from bankrutpcy and look at your entire financial situation. Good luck.
Answer Applies to: Florida
Replied: 5/26/2011
Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
This depends on your state's laws as to whether a deficiency judgment is allowed. Other options that might available to you are loan modifications, short sales or a strategic foreclosure.
Answer Applies to: Washington
Replied: 5/26/2011
The Law Office of Mark J. Markus
The Law Office of Mark J. Markus | Mark Markus
I think what you are asking is whether you will owe any money to your mortgage company after a foreclosure sale. The answer to that depends on the laws of your state. In California, if the loan is the original purchase money loan on the house, first mortgages can only go after the property and there is no further liability to the borrower. Refinanced loans and junior mortgages may be different. Also, many times instead of seeking a deficiency judgment, many mortgage lenders will simply issue a 1099 for forgiveness of debt, which will end up increasing your potential tax liability for that year.
Answer Applies to: California
Replied: 5/26/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
Well it depends..... In some states the mortgage is a "non-recourse loan" meaning you can walk away with no worries. In other states the mortgage is a "recourse" loan and the lender can come after you for the deficiency balance.
Answer Applies to: California
Replied: 5/26/2011
    Burnham & Associates
    Burnham & Associates | Stephanie K. Burnham
    Defaulting on your mortgage may not result in you having the ability to maintain your assets. If you default on your mortgage the home will likely go to foreclosure. This will impact your credit score and will likely result in your interest rates on your credit cards increasing (regardless of whether or not you have been on time with those). Further, you may be liable for any deficiency in the sale price, that is: if the house sells for less than the mortgage you are responsible for the balance on the mortgage. The Mortgage company may choose to seek out payment of the deficiency from you or they may forgive the debt. If they forgive the debt you may be issued a 1099 at the end of the year. This year those 1099 are not being taxed, but it will depend on what is happening in tax law at the time of the deficiency to determine if you have a tax liability. If you have a tax liability it is not dischargeable in Bankruptcy, and you may lose your assets to pay that debt.
    Answer Applies to: New Hampshire
    Replied: 5/26/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    Your credit will be severely impacted, you will lose your home, and if the loan company is unable to resell the home for what you owe, they can go after you for the difference (called a deficiency judgment). You my be able to keep your personal assets and credit cards, but there are no guarantees. Credit Card companies constantly monitor the credit scores of their clients and if there is a drop, they could cancel your cards. Bankruptcy may be your best option if you wish to walk away from the home (but you will almost definitely lose your credit cards but should be able to keep most of your assets). If you are in my area, please contact me for a free consultation.
    Answer Applies to: California
    Replied: 5/26/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    Depending on the laws of your state, you could possibly be stuck with a deficiency on the mortgage debt. Again, this depends on the laws of your state, as well as whether or not you have a first and second mortgage, but if so, then they could sue you for that amount, and possibly attach your assets as well. The credit cards are safe although with the hit you'd take on the credit, it's foreseeable those banks could reduce the amount available.
    Answer Applies to: California
    Replied: 5/26/2011
    The Law Offices of Robert L. Driessen
    The Law Offices of Robert L. Driessen | Robert L. Driessen
    You should meet with an talk to a bankruptcy attorney about what options you have and the potential impact on your credit.
    Answer Applies to: California
    Replied: 5/25/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    Depending on where you live, if you default on your mortgage, the home may be sold in foreclosure and the bank can go after you for the deficiency between how much you owe and what was yielded from the sale of the home.
    Answer Applies to: Indiana
    Replied: 5/25/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    California has an anti-deficiency statute. This means you won't owe money after a foreclosure. You will still have personal assets and credit cards.
    Answer Applies to: California
    Replied: 5/25/2011
    Greifendorff Law Offices, PC
    Greifendorff Law Offices, PC | Christine Wilton
    You need to consult with a bankruptcy lawyer as to your options.
    Answer Applies to: California
    Replied: 5/25/2011
    Symmes Law Group, PLLC
    Symmes Law Group, PLLC | Richard James Symmes
    If you default on the mortgage your home will be foreclosed and you may be liable for any debt owed after the foreclosure is complete. If you file bankruptcy you may discharge your credit card debt along with the foreclosure. If you don't file bankruptcy you can keep your credit cards and you will be liable for all of the remaining debt and your wages could be garnished.
    Answer Applies to: Washington
    Replied: 5/25/2011
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