Mtg higher than house value.

October 19th, 2010 by Questions

A Split. Mtg higher than house value due to re-finance with same bank. Penalty to discharge is $20K. Will try & negotiate with bank to waive penalty & pay back mortgage in full at our cost. If not, loss to bank approx. $20k to sell. I know they can sue us for difference. If we file, which looks like we will, will it protect us from their lawsuit ?

Posted from: Ontario


One Response to “Mtg higher than house value.”

, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

As long as you have initiated the forclosure process prior to filing the bankruptcy the shortfall will be included within the bankruptcy. But you have to be careful of timing. If you file for bankruptcy and the forclosure is not initiated until 6 months after the bankruptcy then the shortfall likely won’t be captured.

The key is when the default occurs, so to be sure you can capture the shortfall you need to contact your bank via phone. Inform them that you are unable to retain the hosue and that they need to stop taking payments out of your account and begin the forclosure process. In addition I recommend you get the name and fax number for the person you spoke with and send them a letter the same day re-stating those exact same things. Then fax the bank the letter, keeping a copy for yourself and the confirmation slip you receive.

This extra step is just for added protection, but once you have done this, this becomes the date of default on the mortgage and you should be fine to file the bankruptcy.

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