I have two properties. One in pa which I owe $275 thousand to bank for and ine in south Carolina that is free and clear. If I can no longer afford to pay for the one in pa and I walk away from it can the bank or anyone try and take the one that's free and clear or put a lean on it
1 Answer from Attorneys
Yes and no. If you walk away from the home in PA, the lender generally can foreclose on the property. There is a procedure that the lender must go through. Assuming that they jump through all of the hoops and the property is sold for less than what you owe, then there will be a deficiency on the property.
The lender can sue you for the deficiency. Whether they will do so is another question and will depend on your other assets and circumstances and how much of a deficiency is sought. If they do not do it within the period prescibed by law, then you are home free. Even if they assert that a deficiency is owed, you may be able to negotiate this as the lender may be willing to accept less.
If the lender does not want to negotiate and decides to sue you, they will probably sue you in PA and get a judgment against you. If the lender finds out that you have property in South Carolina, they can then take the PA judgment to South Carolina, register it in South Carolina and seek to enforce it as they would a South Carolina judgment. If that happens, if you do own the property, the lender may try to force a sale since the property is owned free and clear. However, I am not licensed in South Carolina and you would have to talk to a South Carolina attorney regarding execution on in state and out of state judgments.
Bottom line - you have to do what you must do and if that includes walking away, so be it. Allow the lender to foreclose and see if any deficiency is owed and, if so, how much. Then see if the lender will accept less to settle the matter - could be anywhere from 5% to 50%. If that is not an option, you can always file bankruptcy, but you need to to know the pros and cons of doing so. I don't know what state you will be in when you are ready to file, but I would get a consult with a bankruptcy attorney in your state of residence to know how the South Carolina property would be treated.
Short of just walking away, have you tried to sell the property? Do you have any equity in the property that would make this attractive for the lender if you did a deed-in-lieu of foreclosure? Is this your only mortgage? If a deed-in-lieu will not work, what about an outight sale of the property, if you could find a willing buyer? Given the state of the economy, this may not be an option. If that will not work, what about a short sale?