After Foreclosure, will my lender come after me? If so, would bankruptcy benefit me?

After foreclosure in Arizona, will my lender come after me for the deficiency?

It depends on the type of loan you as homeowner had/have.  If the loan was used to purchase the home, then the loan is considered a “non-recourse” loan, and the homeowner has no personal liability for it, unless there is excessive damage to the home.

In most cases, if the loan was NOT used to purchase or improve the home (such as a HELOC) the lender can sue the homeowner to collect on the loan.  For example, if the homeowner purchased the home, and then borrowed $100,000 under a HELOC, that lender can file a suit in court to collect on the promissory note.

 Would bankruptcy benefit me if I am responsible for the deficiency?

Depending on the homeowner’s financial situation, and depending on the chapter, filing bankruptcy can discharge, or reorganize this type of debt (unsecured debt, once the home is foreclosed). It is common for a homeowner who has/had a significant outstanding balance on a HELOC to file bankruptcy once they’ve realized that foreclosure is probably inevitable, or that foreclosure is the best business decision to make in their situation.

The homeowner must be aware that deficiency statutes, or “anti-deficiency” statutes are different in every state. Therefore, if the homeowner is considering filing bankruptcy after foreclosure, or in anticipation of foreclosure, the homeowner should always seek the advice of an experienced Arizona bankruptcy attorney (or a bankruptcy attorney in whichever state you’re in) to become educated on how bankruptcy would effect them.

Please be aware that any information here or on these sites is for educational purposes only and is not intended to be legal advice. If you need legal advice, please contact an attorney, or contact the Yontz Law Group, P.C. for a free consultation with a bankruptcy attorney in Mesa, Gilbert, Apache Junction, Phoenix, or throughout the state of Arizona.