Chapter 7 and foreclosure

[Anonymous]

hi,

can someone please help me with a question. I had a rental property that i had to give up in chapter 7. Now the law firm responsible for foreclosure process threatening me with a judgment against me? The bk was discharged and debts cleared. It that true and how does that work. I am under impression that after chapter 7 all debts included in bk are cleared. Thank you for your help...

[notw1031]

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@Anonymous wrote:

hi,

can someone please help me with a question. I had a rental property that i had to give up in chapter 7. Now the law firm responsible for foreclosure process threatening me with a judgment against me? The bk was discharged and debts cleared. It that true and how does that work. I am under impression that after chapter 7 all debts included in bk are cleared. Thank you for your help...

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Did you include the property in the BK? Did you reaffirm the loan? If you included it then it is illegal for them to come after you. It may just be that you talk to them, tell them they were included in a discharged chapter 7 BK and if they need the bankruptcy paperwork as proof give it to them. If you reaffirmed the loan, then yes you are legally responsible for it. How long ago was your BK discharged?

[Anonymous]

Thank you for reply. My bk was discharged in October of 2011 and rental property mortgage was included in bk and no i did not reaffirm that mortgage. The paperwork i received from law firm states they are seeking judgement of foreclosure. Looks like they will try to sell the property at public auction. Can I be held responsible for the remaining balance of loan is the sale is less then the amount of loan? Again, thank you for your help.

[chasmith]

Your mortgage was discharged - you don't owe them any money.  But they retain the security interest and have the right to foreclose, and sell the property as long as they follow the rules of your state.  Seeking a "Judgement of Foreclosure" sounds like an action against the property, to take it from you, not against you for money.

Because the debt was discharged in BK they cannot come after you for any remaining balance ("deficiency") or foreclosure costs.

[notw1031]

Nope you're not responsible! They are just getting their property back, and going to sell or auction it off. You may receive a notice in the mail after it is sold letting you know what happened. You will also receive some paperwork that you will need to keep for your taxes called a 1099 A. No, you won't have to pay taxes on the property or owe any balance but by law they have to send this to you. Since you have filed bankruptcy and will receive a discharge, then you may complete IRS Form 982 even if the bank has not issued a 1099-C which is debt forgiveness on the loan. More than likely you will not get the 1099 C but you will get the 1099 A. Bankruptcy discharges the underlying deficiency balance on a foreclosure thereby making the deficiency not taxable income. A common strategy for dealing with foreclosure (or short sale) deficiencies is for the individual to file bankruptcy which you have done......so no worries on your part you will not be liable.