[J User]

We are in a position where the value of our house has plummetted to half the cost of the mortgage and would like to know if we have the bank foreclose would they come after us for any of the mortgage?

[XTC832]

I deal in bankruptcy but I have had clients who are in the same situation. If you file bankruptcy, then your personal liability on the mortgage debt is wiped out. The lien remains on the home, but they could never come after you for any deficiency balance. A deficiency balance results when the mortgage balance is more than what the home is worth. You could never be sued for this amount.

Based on your question, if you go into foreclosure, and there is no bankruptcy, the bank may or may not attempt to collect the deficiency balance. And this would really depend upon the laws in your state. Some states will not grant a bank what's called a deficiency judgment to come after you for the balance. Most courts view this as an insult added to injury type situation. If people go through foreclosure, there is a high probability that they are having great financial hardship and further litigation to collect a debt would simply be overkill. In many of these situations, a court is reluctant to issue a judgment that could garnish your salary or bank account.

However, all the financial factors need to be considered. If they try to get a judgment and you fight it, then you undoubtedly would be asked to prove your financial worth. If you just wanted to walk away from the mortgage but have good income and a fair amount of savings or stock, then a court might side with the bank and grant them a judgment for a specified amount. Keep in mind that it's not the bank's fault that home values have dropped -- but it is not your fault either. The mortgage was secured by an asset that has lost half its value -- there is no one here directly to blame. This is a controversial issue in the courts right now. Hope this helps you a little bit. Take care.