shutterstock_111368114.jpg

Foreclosure

Falling behind on your mortgage can be stressful.  It’s possible to save a house even when you’re significantly behind on your mortgage, but the earlier you act, the more options you’ll have.  There are many government and lender programs available to modify mortgages and allow people to stay in their homes.  If a mortgage modification is not available or feasible, a chapter 13 bankruptcy can be used to help a debtor catch up on mortgage payments.  Even if you want to walk away from your home, you should not ignore lawsuit paperwork.  At the very least, you want to avoid being liable for a deficiency after you’ve left. 

 

Kansas is a judicial foreclosure state meaning that even if you walk away from your home, the bank still must get a court order before it can take the home back.  After the foreclosure, the home will be sold at a sheriff’s sale.  If the sale price of the home at the sheriff’s sale does not cover what you owe on the mortgage, including any court costs and attorney’s fees of the foreclosure, you can be liable for the difference, known as a “deficiency.” 

 

Even if you want to walk away from your home, it can be worthwhile to apply for government “deed-in-lieu” or “short sale” programs to avoid being liable for a deficiency.

Short Sales

A short sale is one solution to being liable for a deficiency.  A short sale is an agreement with your lender to accept a sale price from a 3rd party buyer that is less than what you owe on the home.  The lender agrees to accept less than it is owed and not go after the seller for the deficiency.  Government programs to encourage short sales can even provide cash payments to the sellers walking away from the house to cover moving expenses.

 

Deed-in-Lieu of Foreclosure

Agreeing to do a deed-in-lieu of foreclosure is the last chance borrowers have to avoid a foreclosure.  Most mortgage servicers will not consider a borrower for a deed-in-lieu program until the borrower has attempted to find a buyer to do a short sale.  Signing a deed in lieu of foreclosure just means that the borrower is agreeing to sign the deed for the house back over to the lender.  The lender agrees to take the deed and not pursue the borrower for a deficiency.  Like with short sales, government programs can even provide cash payments to the borrowers walking away from the house to cover moving expenses.