Do you have to file bankruptcy when you have your home foreclosed in CA?

Question

Do you have to file bankruptcy when you have your home foreclosed?

I heard that the lender will sue you for the money you own on your home and the only way out of that is too file bankruptcy. Does anyone know if that is true? We live in California.

Please don’t send any negative comments. Everyone’s home situation is different and not all foreclosures are because people bought a home they couldn’t afford. Some have had terrible things happen in their lives and now they are losing their homes.

Answer 1

The lender will do their best to try go get the full amount of the loan that you owe.  The bankruptcy thing sounds like a scare tactic to get you to pay them.  Maybe they can't do anything because you are protected by a BK.  No matter what I would not file a bankruptcy to avoid being sued because a home loan will not be discharged in a bankruptcy.

Answer 2

Lenders will only try to go after assets.  If you have no assets - a suit is just another expense on top of a bad loan.

Every situation is different, but as a general rule this is how lenders work.

They will try to recover as much as possible, but they are also realistic.  You may think their loss is excessive, but they insure mortgage portfolios for losses, and have the ability to write off losses to reduce tax liability.  Everything is not a black and white as they would like to make you believe.

Any good business has an entry strategy, and an exit strategy --- they account for good, and bad times.

Good luck

Answer 3

You don't HAVE to file bankruptcy, but there are certain conditions that might make a bankruptcy necessary.

The two immediate concerns that send a lot of people into bankruptcy at the same time as a foreclosure are:

1.  Trying to buy time to save the home.  The bankruptcy will take precedent over the foreclosure and the bankruptcy court might allow a borrower to 're-affirm' the mortgage.  

2.  A judgement or excessive taxes due on the forgiven amount can drive a borrower into bankruptcy.  If you have a recourse loan the lender can come after you.  A bankruptcy can wipe out that judgement.  Even if your loan is a non-recourse (meaning no judgement against you), you will owe taxes on the amount forgiven (not federal right now, but state for sure and that can be more than 10% in CA).  

Good luck!

Answer 4

You do not have to file bankruptcy.   It depends on if you plan to s***w them or not.    If you do not feel want to s***w them you will pay the deficiency.