Consequences of a Foreclosure in Texas
Updated on 02 May 2023
Foreclosure! Foreclosure is a scary word with scary consequences. A foreclosure occurs, when the bank or your mortgage lender decides to take back possession of the property they are financing due to you, the borrower, defaulting on your mortgage payments.
If you are facing the prospect of foreclosure in Texas, you may be wondering what the consequences might be and how it will impact your credit score if the bank follows through on its threats to foreclose on your home.You may also be wondering how to stop that foreclosure. For all of those questions & more do not hesitate to call and speak to one of our experienced attorneys at DebtStoppers.
What Does a Foreclosure Look Like on Your Credit Report?
One of the most painful consequences of foreclosure is the damage it causes to your credit score! Generally, the foreclosure will appear on your credit report within three months of the lender initiating the foreclosure process proceedings. As soon as the negative impact is reported on your credit report, you will notice an immediate lowering of your credit score and it will become more difficult for you to obtain new credit.
In addition to the foreclosure lowering your credit score, the consequences are amplified because the lender will also report any missed or delinquent payments that led up to the foreclosure. The reporting of these missed payments, combined with the reporting of the foreclosure, can be catastrophic to your credit score. Because missed payments lower credit scores more than any other derogatory entry, people who are foreclosed upon likely have already seen their score drop substantially before the proceedings even begin.
The negative impact of a foreclosure does not disappear overnight & can take years for you to recover! The negative mark by a lender that you have been the subject of a foreclosure will stay on your credit report for a period of 7 years! This will cause a lasting significant negative impact that is extremely difficult to recover from.
Do You Still Owe Money After a Foreclosure and how long does foreclosure take?
Under Texas law, lenders can foreclose on a house without having to go to court. When you default on your mortgage, your lender can simply use the “power of sale” granted to them by the mortgage to sell the property at auction. That means you never have a chance to argue your case before a judge or a jury, you aren’t given the chance to try and cure any default & you can become homeless with your house being sold to the highest bidder at an auction. To make matters worse, even after the auction of your house, you can still owe money on the house if the sale price at auction is insufficient to cover what you owe on your loan.
Additionally, Texas law permits lenders to sue borrowers for what is known as a “deficiency judgment” within 2 years from the date of the sale--being the date your home was foreclosed on. This means you can lose your home, and the bank can still go after you for more money, and the consequences can continue for years to come.
How To Avoid a Foreclosure and what happens in a foreclosure?
If you’re drowning in debts and have fallen behind on your mortgage payments, filing for bankruptcy is a surefire way to avoid the consequences of foreclosures in Texas. Unlike other methods such as mortgage modifications, bankruptcy can improve your financial situation in its entirety by addressing all of your unsecured debts as well. Additionally, while you are applying for a mortgage modification you are generally told not to pay your mortgage; this causes you to be further delinquent on your mortgage which can lead to additional negative reportings to the credit bureaus.
In Texas, Chapter 13 bankruptcy allows you to reduce and reorganize your debts into an affordable repayment plan that allows you to keep your home, furniture, car, retirement account and other belongings. As soon as you file a Chapter 13 bankruptcy with Debt Stoppers, you’ll also receive the benefits of the automatic stay, which prevents creditors from pursuing foreclosures and other collection activities against you! Even if foreclosure proceedings have already been initiated, the automatic stay granted by a Chapter 13 bankruptcy will stop the process and all of the associated consequences.
You’ve worked hard to build a good life for your family, and you don’t deserve to suffer the consequences of a foreclosure. If your bank is threatening to foreclose on your home, DebtStoppers in Dallas, Fort Worth can help.
Understanding Texas Foreclosure Laws and How Bankruptcy Can Help
Foreclosure laws in Texas can be intimidating for homeowners, as they allow lenders to foreclose on a house without having to go through the court system. This means that homeowners may not have the opportunity to argue their case before a judge, and if the sale price at auction is insufficient to cover the loan, they may still owe money on the property. To avoid the severe consequences of foreclosure in Texas, it is crucial for homeowners to explore their options and consider filing for bankruptcy if necessary.
The Benefits of Filing for Bankruptcy to Avoid Foreclosure
Filing for bankruptcy, specifically Chapter 13 bankruptcy, offers numerous benefits for homeowners facing foreclosure. By reducing and reorganizing debts into an affordable repayment plan, homeowners can keep their home, car, retirement account, and other belongings. Additionally, filing for bankruptcy puts an automatic stay in place, which stops creditors from pursuing foreclosures and other collection activities. This can provide much-needed relief for homeowners already experiencing the stress of missed mortgage payments and the threat of foreclosure.
How DebtStoppers Can Help You Avoid Foreclosure
If your bank is threatening to foreclose on your home, it is essential to seek professional help to explore your options and protect your rights. DebtStoppers in Dallas and Fort Worth has experienced attorneys who can help you navigate the bankruptcy process and provide guidance on how to avoid foreclosure. By working with a knowledgeable attorney, you can take control of your financial situation and secure a brighter future for yourself and your family.
Take Action Today to Protect Your Home and Financial Future
Time is of the essence when it comes to preventing foreclosure in Texas. It is vital for homeowners to act quickly, explore their options, and seek professional help to avoid the lasting consequences of foreclosure on their credit report and financial well-being. Don't wait until it's too late to protect your home and your financial future. Contact DebtStoppers today for a consultation and start working toward a fresh financial start.