Can Countrywide sue after a foreclosure?

[veloguy]

Ok, I spoke with the 2nd attorney today about forclosure vs shortsale or chapter 13.

THIS attorney told me that if we foreclosed on the house, Countrywide could still sue us for the leftover amount due.

For example, our mortgage owed is $343K, our house is only worth $290.

If I foreclose and walk away from the house, can Countrywide still come back and sue me for the $53K difference?

Or do I need to just file for chapter 13 and be done with it and protected?

Thanks for any help.

[HHM]

It depends on state law...but if you have a local attorney telling you they can sue for a deficiency balance, then they probably can.

In short, unless state law prohibits deficiency balances, then yes, the mortgage company can sue for the difference if the home is worth less than what is owed. If the state uses judicial foreclosure, then they probably can get a deficiency balance, if the state uses non-judicial foreclosure (i.e. power of sale), they usually can't get a deficiency.

However, that debt becomes a general unsecured debt and can be discharged in a chapter 7, or only partially paid, or not paid at all in a chapter 13.

[supastar84]

As HHM said, it really depends on the state. For example, I live in Georgia, we have non-judicial. If they foreclosed on me, they could have gone after a deficiency judgment. I hear it is very unlikely, esp if the amt is not extremely large. However, there is always the possibility and I would have had something hanging over my head still.

I tried to get a short sale done on one of my houses through Countrywide. That was an incredibly long process, and never went through. After like two months, they decided they wanted me to sign a promissory note for pretty much the balance between my mortgage and the short sale offer. HA.... no thanks.... I dont see how that would benefit me.

Another thing to consider is going to be the tax treatment of your situation. If you do shortsale, you may have cancellation of debt income.