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What Do I Owe After a Foreclosure?

While most people may think that a foreclosure means the end of their debt problems, it's not that easy. It is still possible to owe money on your mortgage even after your home has been sold at auction.

A lot of folks, however, can't save their homes from being sold at auction. Despite all the talk from the government about modifying the loan, most loan modification applications have been turned down by the major mortgage lenders. Unfortunately, one of the biggest banks in the US has only approved 4% of loan modifications requests. Needless to say, this is bad news for homeowners in debt.

Now, putting the emotional trauma of losing a home aside (if that is possible!), the financial burdens might not yet be over. Many people mistakenly think that they won't have any mortgage debt after their house sells in foreclosure. However, it's not that simple. If the home sells for a lower amount than you owe on your mortgage, you still owe whatever the rest of your mortgage balance. A deficiency is the difference between the value of the mortgage and the selling price of your home.

In this economic climate, it is even more likely for a homeowner to end up with a deficiency after a foreclosure. The current market has caused a big decline in home values. If you bought your home for $100,000 in 2005 with a mortgage, but now your home is only worth $80,000, then chances are that your mortgage balance is greater than the value of your home.

Creditors will try everything they can to get a deficiency repaid. Lenders will try everything they can to recover the balance including garnishing your paycheck, threatening your car or home, or going after what you have in the bank.

Even though you might be drowning in debt, it is not with out hope. There are still other ways to get out of debt. A Chapter 7 bankruptcy can eliminate your deficiency balance and other "unsecured" debts—like credit cards, medical bills, and payday loans. After your debt is eliminated, you will no longer face the burdens of creditor calls, wage garnishment, and threats to your property.

You owe it to yourself and your family to give Chapter 7 a look. Find free information like bankruptcy FAQ, articles, blogs, and even free publications from reputable bankruptcy attorneys in your area. A lot of attorneys offer free consultation. However, the best lawyers offer free information before you ever meet with the face to face.

About the Author:

Jim Brown is the founder and owner of Castle Law Office of St. Louis, P.C. He has been filing bankruptcy cases in Missouri since 1994 and has released several publications based on his experience. You can find these publications and more information by visiting his website at www.CastleLaw.net .

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