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What lengths are justified to avoid foreclosure?

Basalt, CO |

I just made the last interest-only payment on a secured 24-mo. promissory note. Now the $150,000 principal is due and I don't have the cash. The note is secured by my land, which has been listed for sale for 2 years already (price reduced from $925,000 to $575,000!) I have no income and probably cannot qualify for a loan to pay off the promissory note. Is it worth begging from family? What are all the costs I face by letting the promissory note holder foreclose?

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Attorney answers 1


You should exert exactly as much effort as the land is worth to you, and no more. If it's a hellhole that you just bought to speculate, then you might try to sell it for $150K minus the value to you of your current credit rating (since a foreclosure will damage your credit a fair bit). If you love the land and would rather die than not retire and be buried there, you might beg from family or stand out at an intersection with a cardboard sign.

If your creditor forecloses, it will damage your credit rating, and (depending on the facts and state law -- I'm not admitted in Colorado, so I can't comment here) you may be liable for any amount that the creditor can't recover by selling the property.

If the property is worth at least $150,000, and you're not willing to do anything extraordinary to keep it, then your best bet might be to list it for $150K, pay off the note, pocket any excess you get, and write the rest off as School of Hard Knocks tuition.

Keep in mind that an attorney may be able delay the foreclosure or point out other options you may not have considered, so it might be worth consulting with one before making your decision.

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