move her into a senior living center and need advice on how to handle her debt because she cannot pay it. Should she file for bankruptcy or just let the house go into foreclosure?
It is not clear whether or not your mother has any equity in the property and whether she needs to file for bankruptcy to resolve her debt. If her income sources are protected by state laws called exemptions, bankruptcy might be an unnecessary legal maneuver that she could chose to take if creditor harassment is an issue. A link to info on the exemption laws for all 50 states is below. Hope this perspective helps!
She might need to file bankruptcy and ride out the foreclosure, since foreclosure is the only way to clear her name from bank's title. However, unless she has significant assets worth more than attached liens, it may not be necessary to file the bankruptcy, since she might have nothing which could be taken from her. Any lawyer would need a detailed list debts and assets before answering this question.
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You should either get a copy of the property tax assessment on your mother's home, or obtain a real property appraisal on the home. Wisconsin gives bankruptcy debtors a $40,000 exemption on real property that is a homestead. If your mother has no equity in the home, she could file a Chapter 7 case, and surrender the home to the mortgage lender. If her other debts can be discharged, she would be in a position where she can file a Chapter 7, surrender her home, and walk away from any liability on her debts. The mortgage lender would obtain relief from the automatic stay, and would eventually foreclose the home. If there is no equity in the property, your mother could give them a deed in lieu of foreclosure, and speed up the title transfer process with the lender. If your mother has more than $40,000 worth of equity in her home, she should not file a Chapter 7 case, as the trustee will sell the house, and use some of the sale proceeds to pay her creditors. You should get up your valuation information, and schedule an appointment with a local bankruptcy attorney at your earliest opportunity.
Filing may be the only way but as stated by Ms Bunce it is not clear whether or not your mother has any equity in the property.
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She might not have to file, depending on her income source(s), assets, and total debt. If the only debt is the mortgage and she has no equity in the house, a bankruptcy might not be her best option (depending on her income and other assets). Under Wisconsin foreclosure law, lenders do not generally pursue a deficiency balance (money judgment) for amounts due on a mortgage beyond what was bid at the sheriff's sale. Said another way, the lender will not attempt to collect any money or property beyond the house itself and filing a bankruptcy would not accomplish anything. If she has other debt and is being harassed, or has money or property that a creditor could pursue, you may want to file a bankruptcy. Contact a local experienced and credible bankruptcy attorney to ask about her options.
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