One of the most common questions I get as a St. Louis Bankruptcy attorney is, "Won't it cost me less to just surrender my home?" The answer may surprise you. It seems like the answer should be yes. Doesn't the bank just take your home and then leave you alone? Not necessarily.
When your home is sold at a foreclosure auction, it may not sell for what it is worth or, more importantly, what you owe on it. If your home sells for less than your debt to the mortgage company, you will still be held responsible for the balance and your creditors can still come after you. For example, if a man owes $120,000 on his mortgage and his home is only auctioned for $100,000, he still owes his mortgage company $20,000.
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The remaining balance is called a deficiency balance and it can really get people into trouble. Not only will you have lost your home but you will also have to continue to pay for it. The creditor can and will file suit, obtain a judgment and can levy your bank accounts or garnish your paycheck.
Letting your home be foreclosed on can actually leave you in a worse situation than you were in before. Now, it seems clear why one in five people who declare bankruptcy do so to avoid foreclosure. How can bankruptcy help? A Chapter 13 bankruptcy actually stops foreclosure dead in its tracks while also helping to relieve your other debts, remove garnishments from your check, and get your life back to normal. It's no wonder I've had more and more folks calling me every day.
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