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Will a Foreclosure Get Rid of My Debt?

Will a Foreclosure Get Rid of My Debt?

Cash in a WalletMost people struggle to pay all of their bills. They live paycheck to paycheck, some with the help of their credit card. Though it is awful to lose a home, there might also be some relief. You are going to have less debt to find ways to pay off.

Many wonder about other debts. They wonder what debts a foreclosure will get rid of. What does it really do?

Mortgage & Refinancing Debt

A foreclosure does help with debt, but not all of it. It will take away their original mortgage. There are also times when a foreclosure will also remove any debt due to refinancing your home, as well as home equity loans and second mortgages.

Upside-Down/Underwater Mortgages

You may be required to pay off your home equity loans or second mortgages if there is not enough money received in the foreclosure. This often happens when your home is not worth what you paid for it, meaning that you owe more money on it than it could be sold for at this time.

When your home gets sold, if you don't have enough insurance to protect you, you may be required to pay the difference between what was paid for the home and what you owe. This is called a deficiency judgement and allows the bank or mortgage company to collect the difference from you.

Other Debts & Bills

Note that, even if you go through a foreclosure, you will still be required to pay your other bills. You will still have to pay your car payments, credit card bills, and other forms of debt that you may have. Though you will lose a significant amount of debt, you are not going to be completely debt free.

Contact us for all of your legal needs.