I am in Illinois and am going through a foreclosure. My monthly mortgage is $2500 and I can't afford this payment alone (going through a divorce). However, I have several thousands saved, and wanted to know if I bought a home cash at an auction can the bank put a lien on my new property. Also I would put this money toward the loan but I owe $250,000 and I have no where near this amount. I am not trying to skip out on my responsibility, but I do need somewhere to live, and can't afford $2500 a month. Thanks in advance.
2 Answers from Attorneys
Very likely, the foreclosing lender will obtain a deficiency judgment for the amount that is left after applying the proceeds from their sale. That judgment is likely to impact other real estate you own or otherwise impact you financially. Consideration should be given to the availability of bankruptcy down the road, perhaps a joint bankruptcy before your divorce is concluded. Your divorce counsel should be consulted about the issue. You are not specific concerning the amount on hand or whether it has already been apportioned in your divorce case, but it may not preclude you from filing, perhaps now, perhaps later after putting the money into another home.
The scope of this space does not afford an opportunity to assess the situation and advise you. I recommend you assemble for legal consultation: (1) your income information for January 2013 through the present, including wages and unemployment during that period; (2) all your bills (copies neatly assembled, back pages included); (3) last four years’ tax returns; (4) a credit report (use www.annualcreditreport.com to obtain free report if not requested in last year); and (5) other information that may apply, such as copies of lawsuits. Call at your earliest convenience to afford the most opportunity in which to be advised about your best course. You are not required to use an attorney in your area.
I agree with Mr. Repay with the following additional thoughts: you are at risk as a result of both the foreclosure and the divorce. Since we can not possibly know of the complexities of your situation in this kind of forum, it is highly possible that your "savings" could be considered "martial assets" that would be part of the divorce settlement and if funds are diverted to a new home that home could be subjected to it as well. As to the foreclosure while some courts are not granting deficiency judgments there is no way of guaranteeing that, and even if a deficiency judgment is not granted, the lender that writes off the deficiency will issue you a 1099 -- being the amount of the loan being considered "forgiven" -- and is usually considered ORDINARY INCOME --- and while that amount has been declared non-taxable for primary residences, that is a law that expires yearly, and it does not apply to secondary residences --- and so I would NOT purchase a new primary residence pending the foreclosure outcome without consulting with income tax counsel and getting a written opinion - otherwise you could wind up liable for income taxes on any "forgiven" amount.