Q: If my lender already foreclosed, am I still held responsible for the back taxes that were not paid on my home?

A: The real issue isn’t whether you will owe money for unpaid bills on your prior home. The issue is whether the foreclosure of the home and subsequent sale of the home by the lender produced enough cash to satisfy your debt to the lender.

When you buy a home and get a loan, you sign documents that obligate you to repay the lender not only the amount of the loan, but all unpaid interest and other money that the lender might spend before the company closes your account.

If you stopped paying your monthly mortgage payments, the amount you owed the lender would increase by the interest you owed on the money you borrowed and failed to repay.

That amount would also grow as the lender paid the homeowner’s insurance premiums and real estate tax bills that came due against the home. Lastly, if the lender hires a law firm to foreclose on the home, those expenses are added to the amount that you owe the lender.

As you can see, the mortgage amount grows and grows and you owe every penny of that amount.

Let’s say the amount you owed the lender after everything is taken into account is $100,000. If the lender sells the home for $100,000, you won’t owe the lender any money.

Unfortunately, if the sale of the home only nets the lender $90,000, the lender can still chase you for the $10,000 difference.

In some cases, lenders don’t go after the difference from the borrower. After all, the borrower’s credit is shot, they have lost their home and they don’t want to put good money to try to get money from someone that doesn’t have any.

However, in other cases, lenders keep will pursue that homeowner until they get all they can. They even keep the case open with the hope that in the future, the homeowner will come into money. At that point, the debt is still owed and the homeowner would have to pay it off.

If your credit report shows that you went through foreclosure and still owe the lender money, any future lender may require you to pay off that debt before giving you credit. You typically can’t roll the remains of one mortgage into another loan the way you can roll one car loan into another.

You need to find out where you stand with the lender and the foreclosure to determine whether you still owe any money.

The good news is that you can find this information out without contacting the lender. If you don’t have any documents relating to the foreclosure proceedings, you can go to the court where the foreclosure was filed and read through the file. You’ll find the judgment issued by the judge in your case. The final judgment should state the status of your case and whether there was a deficiency judgment issued against you.

A deficiency judgment would be the difference between what the lender got from the sale of the home and what you still owe the lender. The deficiency judgment gives the lender the right to continue to go after you for that amount of money.

Published: Mar 28, 2006