Ways Out of a Foreclosure

3 min read

Think the only way out of a foreclosure is to file for bankruptcy?

Every situation is different, and bankruptcy may not be the right answer for you. If your home debt is the sole reason you are considering bankruptcy, that is most likely not the best solution. A deed in lieu or a short sale may be the better option.

What bankruptcy does and does not cover

If you are considering bankruptcy, it should be noted that after the bankruptcy is discharged there may still be debt for HOA or condo fees, taxes, and similar charges. Fees incurred before filing are released from your responsibility; however, all fees incurred after filing will still be due. Some homeowners believe that if the forfeited home is included in the bankruptcy they are no longer responsible for those fees, but that is simply not true. Furthermore, the title to the home remains in your name and you are still responsible until the title is transferred to a new owner. As the owner of the property, you also still have responsibility and liability for any incident or accident that occurs on the property during your ownership, which is why it is important to maintain your property insurance.

Short sale and deed in lieu

If you decide a short sale or deed in lieu is the best route, it is good to know that in many cases the lender will release any remaining debt after the deed is transferred out of your name. It is also important to be sure that your lawyer or Realtor negotiates the release of any outstanding liens or money due for taxes, HOA fees, and the like. Having an experienced Realtor and lawyer can help eliminate surprises after the sale.

You may also want to consider a deed in lieu of foreclosure. This option can be a good one if you are released from the remaining debt after turning over the title to the lender. It usually works best when there is only one mortgage holder and no delinquency for any HOA or condo fees. You will still need to negotiate the remaining liens.

Consult with an experienced attorney to discuss these issues.