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JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience:  Attorney in the practice of Bankruptcy Law since 1996
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I own a home in Denver that now has major plumbing issues ...

Customer Question

I own a home in Denver that now has major plumbing issues at a cost of $10,000 to replace main sewer line. I don't have any money saved and can't get a loan. Can I be sued and go to jail if we just move out and let them forclose on the home? What is the difference in just walking away and filing bankruptcy?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 8 years ago.


Generally speaking: yes, you can be sued if you move out of the home, but no, you do not go to jail for it.

So, if a person simply up and leaves a home on which they owe a mortgage, the mortgage lender can sue the person to foreclose the property. If the property does not sell for enough at the foreclosure sale to pay the mortgage loan plus costs in full, the mortgage lender can usually go after the person for the difference left owing, called the "deficiency balance." This varies from state to state, but that's how it usually spins out. Some states do not allow the mortgage lender to pursue the deficiency balance, or only allows the lender to pursue it in certain circumstances. In my jurisdiction, lenders are always allowed to pursue it.

Generally it is wise for one who just leaves a home to notify the lender in writing, and keep a copy, that he or she is leaving so the lender can change the locks and take other actions to protect the property (winterize it, etc). If a person just leaves and doesn't notify the lender, the lender may have additional claims against the person for negligently or willfully allowing the house to get damaged or fall into serious disrepair.

If one files bankruptcy, the lender still often has to foreclose the property to get the person's name off the deed, so frequently a bankruptcy is followed by a foreclosure. But, the big difference is that the deficiency balance is discharged by the bankruptcy, so the lender cannot ever come after the person for any money (unless, like I mentioned earlier, the person willfully damaged the home, etc.).

Many people let the lender foreclose first, and if the lender pursues a deficiency balance, then they file bankruptcy and discharge it. If the lender never pursues the deficiency, then they do not have to file bankruptcy.

I hope this helps and a positive feedback is always appreciated if this was useful to you.


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