Foreclosure Law in Minnesota
I just found this newsgroup while doing a google search on bankruptcy
and had a question I am sure can be answered here :-) By the way, I
live in Minnesota if that's of any help.
Husband and I have 2 mortages on a home valued at $190,000. Selling it
isn't an option as house's just aren't going right now in our area for
what we would need to break even on it. Along with $12,000 in CC debt
and 2 auto loans, it's just not possible to make it. (lay off's &
restructuring" after 11 yrs of employment with compnay)
My questions: If we foreclose on the home and it sells for LESS than
the loan amounts, are we responsible for the difference?? I figure we
probably are but want to double check. And if we are, can we include
the difference in a Chpt 7 bankruptcy. Also, we also have 2 auto's
that we need to let go as voluntary repossessions. Once the creditor
sells them are we responsible for the difference in price vs. loan
with a chpt 7, and if so can that amount also be included in a chpt 7
?
How long does an official foreclusure take? Should we file BEFORE or
AFTER the foreclosure/reposessions?
_Of course, you should talk to a few bankruptcy attorneys in your area. Many
will give you a free inital consultation. Even if bankruptcy might be in
your future, there are questions about when would be the best time for you
to file -- now or later. Sometimes, it pays to wait. On the other hand,
there are potential bankruptcy law changes in the wind. So, see a
bankruptcy attorney ASAP because he/she can give you a lot of good
information in one brief visit.
As far as the balance still due after a foreclosure or repossession, yes,
they become unsecured debts that you owe and that can be included in your
bankruptcy.
I am not a lawyer, so the above is just what I think from reading etc.
_I don't know whether MN law allows the collection of a deficiency judgment
(the difference between what a property sells for at foreclosure [plus
expenses] and what is owed). I can tell you that it is discharged in a
Chapter 7, as is any deficiency resulting from a voluntary repossession.
I have written a Bankruptcy FAQ which should answer many of your questions
about what is involved--it may be found at
http://users.erols.com/lawyer/FAQ/br_faq.htm.
I strongly recommend speaking with a local bankruptcy attorney. Most offer
free initial consultations and he or she should be able to review your
specific situation and let you know what you can and can't do.
_Several scenarios present themselves in your hypotheticals. First, the
following is not intended and should not be construed as legal advice. The
application of the following to your actual case must be discussed with a
competent bankruptcy attorney in your area.
If the loans on your house exceed the value of the house itself (collateral)
you can "adjust" this debt within a chapter 13 case via what's called
valuation proceedings and application of what's called a cram down. Assuming
the collateral is worth 150,000, for example, and the loans are $190,000,
$40,000 could be moved to the general, unsecured portion of the bankruptcy
estate. upon completion of the Chapter 13 plan, the $40,000 (minus what is
paid to all general unsecured creditors prorata within the plan) would be
discharged. This is a coerced loan scenario and a powerful reason to
consider a Chapter 13 over Chapter 7. The arrears could be caught up within
the plan. Assuming there is the possibility of other debt adjustment, the
monthly outflows may be reduced sufficiently to make keeping a house
feasible. This should be carefully looked at with a competent bankruptcy
attorney in your area.
Assuming there is no lien strip scenario, a debtor can file a Chapter 7 now
and surrender the property. The mechanics of this usually entails
non-opposition to the motion for relief from automatic stay that would be
filed by the holder of the mortgage shortly after the petition for voluntary
Chapter 7 relief was filed. The debt and all associated costs should be
scheduled and, thereafter, these debts would all fall under the general
discharge injunction. It is, generally, not necessary to wait. The debt
itself is discharged and all the lender has as its recourse is the
collateral itself. Once surrendered, this resolves the matter.