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Do I have to file bankruptcy if I my home goes into foreclosure?

Queen Creek, AZ |

I had several finance hardships and am unable to pay for my home in AZ. I now found out that home is worth 100,000. less than I paid for it. Can I just drop off the keys and let them know I can't do it anymore? I am deep in credit card debt because I tried & put several payments on my cards to try to keep up & ended up going to a debt consolidation service.
Both mortgages are with the same bank.
When the house goes into foreclosure, will I have to pay anything else? Can they garnish my wages or seize other bank account?

Attorney Answers 3


  1. Unfortunately, you cannot just drop off the keys and ask the bank to take back the house and call it even. You will need to deal with the $100,000 deficiency. Please contact my office for a free consultation so that we can discuss all of your options.


  2. Short answer is no you do not. Working in foreclosures in New Jersey, is distresses me to read about situations like yours. Most debt consolidation services are scams. When I also read that "[b]oth mortgages are with the same bank" it really raises my dander.
    I don't know what Arizona is doing to assist their homeowners but I hope you can avail yourself of some type of foreclosure mediation service.
    Usually the State Department of the Public Advocate is the place to look for assistance.
    I did a little research and I found HUD's site for foreclosure information in Arizona. You'll find the link below. Read - get information - engage the service of a foreclosure DEFENSE attorney who will advocate on your behalf against the bank.
    Good luck.


  3. THIS ANSWER DOES NOT CONSTITUTE LEGAL ADVICE OR FORM AN ATTORNEY-CLIENT RELATIONSHIP.

    Whether or not you will be subject to any deficiency following a foreclosure depends on the facts related to the 2 loans. Assuming Arizona law applies (check your promissory note and other loan documents), and assuming that your home is a single family home (condos and townhouses are included) on 2.5 acres or less that is used as a dwelling, when your first lender sells the home at trustee’s sale, Arizona’s anti-deficiency statute will prevent the 1st lender from seeking any deficiency against you. This will also be the case if your 1st lender pursued a judicial foreclosure (which is unlikely) and your loan is a purchase money loan (meaning that the loan was used to pay all or a portion of the purchase price). However, the 2nd loan may or may not fall within AZ’s anti-deficiency statute depending on the facts.

    If the 2nd is a non-purchase loan and is wiped out by the foreclosure of the 1st loan, the lender may pursue you individually for the debt. If the 2nd loan is a purchase money loan, then the lender will be barred from pursuing you individually on the debt after the foreclosure on the first.

    With all respect to the attorney providing the prior answer, you can simply deliver the keys to your lender and walk away from the home. However, whether doing so is the right thing to do in your situation depends on the facts and other personal issues only you can answer. If both loans fall under the anti-deficiency statute, then you won’t have any further liability to the lenders and mailing in the keys may make sense. If you would face additional liability to the 2nd lender after foreclosure on the 1st loan, then you would need to seek bankruptcy protection to prevent the lender from going after you and ultimately garnishing your wages or assets. Whether the lender would so or not is up to the lender and whether it thinks it would make sense. Lenders also sell their debts so you could get a call from a debt collection company.

    Also remember that there is personal liability for HOA assessments so it may be wise to pay your HOA in full even if you decide to let the homes go to foreclosure.

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