PMI Insurance and deficiency judgement

[mabryr1]

I am facing foreclosure with a hearing in a week, my attorney who is defending the foreclosure advises us to file ch. 7 bankruptcy to take care of the deficiency judgement citimortgage will file against us after the sale. We have less than $2500 dollars in unsecured debt. I met with a credit counselor today as is required to file bankruptcy and was informed that I do not need to file bankruptcy. We don't have enough debt to warrant it and having PMI insurance there will not be a deficiency judgement filed by Citi. Our credit report will show a repossession with a 0 balance. Is this correct and what do you recommend?

Living in SC
12 months behind
denied Obama Plan

[faith]

Originally Posted by mabryr1

I am facing foreclosure with a hearing in a week, my attorney who is defending the foreclosure advises us to file ch. 7 bankruptcy to take care of the deficiency judgement citimortgage will file against us after the sale. We have less than $2500 dollars in unsecured debt. I met with a credit counselor today as is required to file bankruptcy and was informed that I do not need to file bankruptcy. We don't have enough debt to warrant it and having PMI insurance there will not be a deficiency judgement filed by Citi. Our credit report will show a repossession with a 0 balance. Is this correct and what do you recommend?

Originally Posted by mabryr1

Living in SC
12 months behind
denied Obama Plan

Hello and welcome to this forum,

I cannot find SC a recourse state. Here's the list of non recourse state:
Anti-Deficiency / Non-Recourse States
Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington


Did you say you only have $2,500 left as unsecured debt as a result of the foreclosure? You can always negotiate to settle the amount owed. If the PMI company ask you to pay the $2,500, tell them you want to settle and willing to pay 5% or 10% of the amount owed. Ask for a letter stating that the amount owed is paid and settled in less than full balance and that's how they will report it to the credit bureaus.

Don’t file for bankruptcy, unless you really have to. Statistics shows from the American Bar Association that 96% of the people who file bankruptcy end up losing their homes anyway—so they’re left with a foreclosure AND a bankruptcy on their records. In some cases, bankruptcy is still a viable option, but don’t make any decisions without getting professional advice. Make sure you hire a bankruptcy lawyer familiar with Real Estate.. Just want to let you know bankruptcy is very expensive, lawyers charge from $2,500 and up.

I don't think that the PMI will pursue you for a deficiency judgment since the amount is only $2,500 but in the event they do, try to settle with negotiating the amount paying 5% or 10% of the amount owed.

Hope this helps.

God bless and take care,

[mabryr1]

No, I owe over 135,000 to the mortgage company. AFter they sell it at auction, I'll owe the difference. We have it listed for a short sale at 99,000 with no interest at all. Who knows what they'll actually sell it for!

The credit counselor suggested that because we owe $2500 in credit card debt and a few misc bills, that it did not warrant filing bankruptcy just to avoid the mortgage company filing a judgement against us for the difference. She stated that since we have PMI that on our credit report it would show a repossession with a 0 balance. Because the PMI will pay the lender the difference.

I am worried that they will still come after us with a judgement for the difference at some future date! Do you know how this has affected anyone with PMI that chose not to file bankruptcy? Thanks

[faith]

Originally Posted by mabryr1

No, I owe over 135,000 to the mortgage company. AFter they sell it at auction, I'll owe the difference. We have it listed for a short sale at 99,000 with no interest at all. Who knows what they'll actually sell it for!

The credit counselor suggested that because we owe $2500 in credit card debt and a few misc bills, that it did not warrant filing bankruptcy just to avoid the mortgage company filing a judgement against us for the difference. She stated that since we have PMI that on our credit report it would show a repossession with a 0 balance. Because the PMI will pay the lender the difference.

I am worried that they will still come after us with a judgement for the difference at some future date! Do you know how this has affected anyone with PMI that chose not to file bankruptcy? Thanks

Oh, I am sorry I thought that the balance owed is $2,500. My mistake.
The $35,000 can only be collected through the court system. Once the house foreclosed, it is now considered unsecured loan. In any event, you can always negotiate to pay $5% or 10% of $35,000 which is $1,750 or $3,500 payable in 5 years and no interest. Your credit score will be affected because of the foreclosure, probably around 300-400 points and you can not buy a house for 7 years. If you don't want to pay them, it's up to you, it doesn't make any difference as far as your credit score is concern due to your foreclosure, it's already been affected.

In some instances, Lenders and PMI will not pursue for any deficiency judgment because it is very expensive to do it. If you have a lot of money and assets they might do it but I don't think they will since the house foreclosed.

I have found this topic and it might help you answer some of your questions. Please click the link below:
Deficiency Judgments After Foreclosure - Do Banks Really Sue For Them?

God bless and take care,