What Is The Worst Thing That Can Happen ?

GetOut

LoanSafe Member
#1
This probably sounds like a strange question, but what is the ABSOLUTE worst thing that can happen to a foreclosed homeowner, aside from significant damage to the credit score ? Is it possible deficiency ? Is it having to live with the bad credit for 7.5 years ? Is it possible trouble with the employer ? Is it high auto insurance rates and difficulty with potential landlords ? Is it dealing with junk debt collectors and with creditors' lawyers ?

We have purchase money loans, and we moved out before foreclosure action commenced ! We are trying to get a short sale done, but if we can't, and the home is foreclosed on, what is the absolute worst thing that can happen to us as a result ? THANK GOD DEBTORS' PRISONS don't exist in America anymore !!

We don't plan on buying a home again for the next 10 to 12 years, and we will probably pay cash for our next automobile. Almost 90% of our assets is tied up in creditor proof 401Ks, and the rest is held in a ROTH IRA. We dont have "regular" investment accounts, except for bank accounts which have about $2000 in all. Yes, we need to build up an emergency fund (to hide under our mattress) as we have very little disposable cash.

My husband's employer ran an extensive background and credit check on him when he was hired a little while ago. We have no clue if they run these checks every year, but hope they won't ! Is this the only thing that we should REALLY worry about - a possible deficiency lawsuit, and the employer finding out about it, putting his job at risk ?? Has anyone here actually experienced a job loss or had a threatened job loss over poor credit following foreclosure or foreclosure related litigation ?

Anyway, back to my query : what is the worst than can happen to us, aside from a job loss, given our situation as described above ? Thank you for any advise / help you can give us.
 

buchanovich

LoanSafe Member
#2
The worst case depends on the laws of the state in which you live. Some offer more protection to debtors than others. Laws affecting garnishments, which obviously involve letting employers know, and property protection are key. Some states with substantial homestead provisions protect your primary home (homestead) more than others. Some protect property better than others with titling technicalities.

Your worst case scenario would be if the creditor notifies an employer after a judgment resulting in a writ of garnishment. Depends on the state. In some states, you can avoid service of the summons for deficiency suit and it goes nowhere. There's a difference in service between things and people: a house gets served in a foreclosure; you must be served in a case involving personal liability. Know your laws, do your research. I've spoken to several lawyers - my wife laughs at me - but I have found them contradicting each other in some issues. You'll see that in the pages of this site, people like yourself describing their situations and how lawyers have told them different things, sometimes detrimental to their interests.

You can best determine what is worst by examining your situation and doing the reading. Pay particular attention to laws including "Tenancy by the Entirety" , "Homestead", "service of Process", and the general foreclosure process and the handling of the deficiency. Several states have adopted "fast track" foreclosures; look also at the response requirements
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#3
I agree with bucanovich. That was excellent advice. Hard to add to that. But yes, in my opinion, the worst thing that could happen would be a wage garnishment. That would be a rough one in this economy for most people..
 

GetOut

LoanSafe Member
#4
Quite frankly, Moe, at this point, I am not above filing for legal separation, and requesting child & spousal support, if that will protect his situation with the employer. As soon as we find out that any lender has started legal action, down to the court house I go and file for legal separation. I would think that the courts would view garnishments for child & spousal support less negatively than for a collections' judgment ?

This is the only way I can keep judgment creditors off his back, I imagine ? I mean, if he has to pay me 25% of his disposable income in spousal & child support, there would be nothing left to garnish ? Of course, they could still garnish our bank accounts BUT we can always move to Delaware to circumvent that, yes ?

I mean all of the above very seriously. This is all mostly my fault and it is my responsibility to prevent his employer from getting a writ of garnishment from any would-be judgment creditors. I can't see any other way of doing this, aside from becoming his FIRST and the highest priority judgment creditor (if any were to ever emerge).
 

buchanovich

LoanSafe Member
#5
ALso, research the laws in your state regarding the garnishment exemptions, particularly for a "Head of Houshold". In some states a separation could be the worst tactic. Research it first. I agree that in this economy, a garnishment is a hit but, potential loss of job is even worse. Don't panic, know the laws. You haven't been foreclosed yet. I would say you need to do all the asset protection you can under the laws of your state and present the lawyers withe a multi-line defense so they will just settle and go away to greener pastures. You have protected the most important - cash. Check other things. Also, check your own credit so you'll know what the employer will see if/when they look at it.

Remember that, right now, the "forgiven debt" in a short-sale is taxable. Only you know your situation such as possible amount and tax bracket.

Did I say "Don't Panic?" Don't! It can be worked on, knowledge is power. AS a great negotiating instructor , Herb Cohen once said: "If you think you have power, even if you don't have power, you have power. If you don't think you have power, even if you have power, you do not have power."
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#6
I don't blame you on your course of action. When backed in a corner, you have to come out fighting .

In regards to moving out of state, my understanding is all they would have to do is find you and then file a lawsuit in your state under their laws for a judgement and wage garnishment. You can search for states that have more favorable laws that allow you to protect a portion of your wages. I'm just not sure if there is any.

The courts seem to be impartial to humans or whatever that may be. It is the rule of law and a judgment is a judgement, but there are human and child support may be looked at more unfavorably by the courts, employers and people who may find out.
 

buchanovich

LoanSafe Member
#7
Moving to another state is of course premature since any need is likely at least a year off and, probably more. You need to go through foreclosure and then a deficiency suit (depending on laws of your state it can be done at the same time, other states require a separate hearing). So, it'll be a while. However, a willingness to move, unless you are in an area near a state border and can work in the other state, which has its own set of complications, indicates a willingness to give up the job. Something you might need to consider anyway as a possible alternate path in case the current job does go kerflooey.

As far as Moe's point about states offering favorable laws allowing you to protect a portion of wages, there are some. I cannot pretend to know all of them. However, for example, Florida protects $750. per week of disposable earnings for a head of household. Head of household defined as someone providing more than 1/2 the support of a dependent child. There's more to the law and another $750 can be protected under a variety of circumstances. If you were in FLorida, I would also advise you to buy a new car on a loan if your credit rating allows, which would accomplish two things: reduce disposable income; reduce your equity in a vehicle which then makes it judgment proof. These are just examples and I'm sure other states have similar, I just don't know them. Research!
 

GetOut

LoanSafe Member
#8
I don't blame you on your course of action. When backed in a corner, you have to come out fighting .

In regards to moving out of state, my understanding is all they would have to do is find you and then file a lawsuit in your state under their laws for a judgement and wage garnishment. You can search for states that have more favorable laws that allow you to protect a portion of your wages. I'm just not sure if there is any.
The courts seem to be impartial to humans or whatever that may be. It is the rule of law and a judgment is a judgement, but there are human and child support may be looked at more unfavorably by the courts, employers and people who may find out.
Moe, I am confused. Did you, perhaps, mean that that human and child support may be looked at MORE favorably by the courts and employers ? Thank you for clarifying.
 

GetOut

LoanSafe Member
#9
Moving to another state is of course premature since any need is likely at least a year off and, probably more. You need to go through foreclosure and then a deficiency suit (depending on laws of your state it can be done at the same time, other states require a separate hearing). So, it'll be a while. However, a willingness to move, unless you are in an area near a state border and can work in the other state, which has its own set of complications, indicates a willingness to give up the job. Something you might need to consider anyway as a possible alternate path in case the current job does go kerflooey.

As far as Moe's point about states offering favorable laws allowing you to protect a portion of wages, there are some. I cannot pretend to know all of them. However, for example, Florida protects $750. per week of disposable earnings for a head of household. Head of household defined as someone providing more than 1/2 the support of a dependent child. There's more to the law and another $750 can be protected under a variety of circumstances. If you were in FLorida, I would also advise you to buy a new car on a loan if your credit rating allows, which would accomplish two things: reduce disposable income; reduce your equity in a vehicle which then makes it judgment proof. These are just examples and I'm sure other states have similar, I just don't know them. Research!
We are currently in California, and there is no "head of household" exception here. We did think of the possibility of a job loss should the employer discover our "secret" but that is at least a year away. We may eventually end up having to look at bankruptcy but I am hoping we won't have to, as our loans are all purchase-money and hence, technically at least, non-recourse. Our former high priced lawyer told us this as did some members on this forum (which is how we got the nerve to actually take this step).

We had been contemplating moving to another state for a few years now. Maybe this is the catalyst that will finally enable THAT to happen. As long as we own our home, we would be tied down here. Maybe everything happens for the best !
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#10
Moe, I am confused. Did you, perhaps, mean that that human and child support may be looked at MORE favorably by the courts and employers ? Thank you for clarifying.
Sorry, I meant that child support would be looked at more unfavorably by the courts and employers. I may have been confused by this statement; "Quite frankly, Moe, at this point, I am not above filing for legal separation, and requesting child & spousal support, if that will protect his situation with the employer. I was thinking you had planned this as a possible strategy.

Sometimes things like this are a blessing in disguise, and other times it is what it is. If you are or have thought about moving out of state, this may be a good time as long as you would be happy living in another state long term.
 

GetOut

LoanSafe Member
#11
I choose to think of this as a blessing in disguise. I really do. We can now start fresh when we are still comparatively "young".

Yes, I was planning on a "strategic separation" but it seems that that may be a bad idea.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#12
Fresh starts are most always good. Regardless of the past or current issues, they can help revive a family such as yours. With you and your husband being fairly young, I would imagine there is plenty of time to recover from all this BS. After all, your dent and credit is not what defines you as a person, but your heart and actions.

In the end, do what is best for you in the long run without compromising your morals or good will. Just FYI, I do not think strategizing such as strategic separation is bad, but it may just not work as planned and in the end, it may be you two who get hurt long term.

I love this saying by Martin Luther King Jr. that he wrote in his letter:

“One has not only a legal but a moral responsibility to obey just laws. Conversely one has a moral responsibility to disobey unjust laws”

However you want to take Mr. Kings advice is up to you and your morals in regards to dealing with debt and credit laws. Last time I checked, the banks seem to do this in reverse.