Newspaper article THE JOURNAL RECORD

Covering Bills after Closing Loans May Be Difference between Survival and Bankruptcy

Newspaper article THE JOURNAL RECORD

Covering Bills after Closing Loans May Be Difference between Survival and Bankruptcy

Article excerpt

You buy a wonderful house for $100,000 with $85,000 of that amount borrowed. A few months later, your job is abolished because Zogomatic Prefreezed Flapjacks can be made more efficiently in the Flatzis Islands, and now you can't make the mortgage payments.

Meanwhile, a waste disposal facility has been established next door.

So when the bank sells the property, the net proceeds are $5,000. Who is liable for the remaining $80,000?

You might assume that if a lender takes back, say, a car, you don't have to pay any more. This isn't true. The lender can get a ``deficiency'' judgment to collect what's still unpaid!

If your spouse signed a note for a loan or a mortgage that includes a promise to pay, not just a pledge of the property, your spouse's savings and even future income can be tapped as quickly as snapping your fingers.

Of course, if the loan is paid off, none of this makes any difference. But if a bill is still left after the property is sold to pay part of the loan, the difference can be important - the difference, perhaps, between economic survival and bankruptcy.

Bankruptcies may seem routine for conglomerate giants, but they can be most unpleasant for an individual. They can lead to homelessness, dependency, other devastating consequences.

You can protect yourself - and your spouse. But you must know what you are doing.

Decide whether you really need to list the income or assets of both spouses to show credit worthiness when applying for a loan or line of credit. If so, then of course both will be liable.

Be sure you know whether a spouse whose income or assets aren't the basis for the loan is just pledging an interest in the property - or also agreeing to pay the loan. If the latter, be aware: this means paying personally with any other assets the spouse has. …

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