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Roger
Roger, Lawyer
Category: Real Estate Law
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My friend recently received a letter stating that her home

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My friend recently received a letter stating that her home was going into foreclosure. She filed for bankruptcy a couple of months ago and entered into a loan modification. To make a long story short, her husband was in charge of the finances and basically got them into this situation. She just left him and wants to do what she can to get herself back on her feet. The home is solely in her name. If she pays what's due on her house, can she then sell it? What's the difference between a foreclosure and a short-sale? Does she have any other options?

Because the loan is in default and foreclosure proceedings have begun, the only way she could sell the house is if the lender agreed to the sale. Also, her husband would have to sign off on the sale - even though his name is XXXXX XXXXX the title. He's acquired an equitable interest in the marital home by virtue of the marriage. Therefore, his interest must be transferred too.

 

A foreclosure is a process where the property is sold at public auction (process here: http://www.foreclosure.com/statelaw_PA.html).

 

A short sale is where the lender allows the owner to sell the property on the open market for less than the payoff amount of the loan.

 

Either way, the owner can be sued for a deficiency judgment unless an agreement not to do so is reached between the lender and the owner. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount of the original loan. Deficiency actions must be brought within six (6) months of the foreclosure sale.

Customer: replied 6 years ago.
So if she, her husband, and the lender agree to a short-sale and sell the house, they will still owe the difference on their loan? If the home is foreclosed and sold at public auction, will they still owe the bank money? And, how much worse does a foreclosure look on her credit history than a short-sale? Since the house is not in her husband's name, does this also affect his credit score?
Yes. Either way, they will still owe the lender the balance of the loan. The lender can seek to recover this money by filing a deficiency judgment action.

Both look bad on one's credit, but the foreclosure is worse.

If his name is XXXXX XXXXX the loan, it will not appear on his credit.
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Customer: replied 6 years ago.
Is it possible that she could somehow get her house added to the bankruptcy filing she did a few months ago? If there was a way to do that, then she wouldn't owe the lender anything, right?
She can try to amend the schedules and include the house, but she may be out of time to do so. If so, she'd have to ask the court for permission to amend the schedules.

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