My home was foreclosed on last year. The total outstanding debt at the time of the foreclosure was $300K (including principal, interest, fees, taxes, etc).
The bank sold my property to itself on the court room steps the day of the foreclosure for $100K. It later confirmed the sale with a very low appraisal which the judge accepted in spite of my attorney providing a much higher appraisal .
Three months later, the bank subsequently sold the property for $275K.
I recently received a letter from a debt collector representing the bank. Per the letter, the bank (via the collection agency) is attempting collect $200K. The letter sited the foreclosed loan balance of $300K and the confirmed sale amount of $100K.
In reality, the bank sold the foreclosed property for $275K. Can they really sue for 200K?
3 Answers from Attorneys
As I am sure your lawyer already told you, yes. The time to win or lose this battle was at confirmation trial. With a debt that large, consider wiping it out in bankruptcy.
If there was a confirmation hearing then that hearing fixed the price so that the bank could pursue a deficiency judgment. What the property later sold for is not relevant. What matters is whether the price at the foreclosure sale was a fair and reasonable price. The court ruled that it was. If it wasn't, it was up to you to put forth a case for why it wasn't at this hearing.
While you should certainly consider bankruptcy as a last resort, I know nothing about your assets, debts and income. Settlements can be reached. Do you have the resources to be able to settle this debt for around $50,000? If that is out of the question, then you have some time especially since the debt is with a debt collector and not yet at the lawsuit stage. Use that time wisely. Many attorneys give free bankruptcy consults. I would get one and educate yourself on the bankruptcy process. If you can file a chapter 7, you might want to do that. There are pros and cons to doing it now versus waiting. The foreclosure affected your credit and bankruptcy will not help. So if you want to begin to fix your credit maybe filing bankruptcy now is the way to go. On the other hand, if you file now and succeed in getting a discharge, you will not be able to refile for awhile (8 years for a chapter 7) so if other losses might be coming you might want to wait a bit and see if you are sued and then file.
Yes, they can. Once the Judge made the decision and the time to appeal it ran, there is nothing you can do to change the amount of the deficiency. They are entitled to attempt to collect, and can sue you for it. As the others told you, you can settle with them, look into bankruptcy to eliminate or reduce the debt, or wait for them to come after you. This is truly one of those situations where the laws in place result in a terrible result, but you need to accept that and work on doing something to get yourself out of it.
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