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I own a house in Indiana but now live in Arizona. Which states foreclosure laws apply? Recourse or Non-Recourse.

Gilbert, AZ |

As stated, I now live in Arizona but own a home in Indiana. Three tenants and thousands of dollars later in costly repairs, (In only a year) and I have had it (financially and mentally). We have worked really hard to repair are credit and don't want it ruined but we can't continue to take this kind of hit. We owe more than it's worth and the Lender is not willing to work with us. Question 1: If I mail in the keys and let the lender sell the home, will I be held liable for the diference? I know Indiana is a recourse state and Arizona is a non recourse state? Question 2: If Indiana law does apply will Arizona enforce or order a judgement? Question 3: If the lender can sue me for the balance, will they do it in Indiana or Arizona?

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Attorney answers 3


First, foreclosure law always applies based on the state that the property is located, not where your personal residence is. Given what you have stated, the foreclosure would be in Indiana. I believe that Indiana is a judicial foreclosure state, which means that the foreclosure will have to go through the Court system. This gives you an opportunity to contest the foreclosure in Court, but could be costly. If the lender obtains a judgment against you in IN, the judgment can be enforced in AZ as a foreign judgment.
Mailing in the keys does not do anything for you, as the lender has no obligation to accept them or to accept a deed-in-lieu. In fact, the Lender faces potentially increased liability by doing so.
I find it amazing that the lender will not work with you. If your loan is with Chase, CitiMortgage, Wells Fargo, Bank of America or Ally/GMAC, they are required to work with you as part of a major settlement agreement, in which the IN Attorney General participated. However, the home has to be your primary residence, which does not appear to be the case here.
I would highly recommend a good foreclosure defense attorney in IN to help guide you through the various alternatives available to you. There is help out there. You are one of millions in the same boat. Good luck!

This answer is for general information only and does not create an attorney client relationship between Navaro & Associates LLC and any person. You should schedule a consultation with an attorney to discuss the specifics of your legal issues. Our firm offers free consultations up to 1/2 hour.


Step one, find yourself a good Indiana real estate attorney and pay for a good consultation. In short ... (1) Likely yes, and do not simply mail in the keys as this accomplishes nothing. You remain liable for the home until it is transferred out of your name; (2) Yes; (3) the foreclosure will occur in Indiana and ultimate enforcement here where you live.

Douglas Edmunds is in the business of helping people and companies file for bankruptcy protection. The bankruptcy code requires that I call my firm a "debt relief agency." Any answers or information provided is for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the legal issues. This is not intended to create a attorney-client relationship. Each individual's situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state for specific information.


Have you thought about a short sale? Our offices, one of which is in the East Valley, has an on-staff broker who deals only with short sales. It is a wonderful option for negotiating debts such as yours.

Very often, all debt associated with the property can be negotiated in the short sale. If you are not aware, that is ultimately what a short sale is. The broker finds a buyer, and the purchase amount is offered to the first, with some often negotiated for other creditors to the property. Our firm charges nothing for conducting the short sale. No fees, whatsoever.

Give us a call for a free consultation.

Scott A. Mac Leod is licensed to practice law in Arizona. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.

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