Bank Gets the House Back - Am I Free and Clear?

In the age of Foreclosure, people often want to know if they are "free and clear" if they let the bank take back a house through the foreclosure process. This is additionally complicated for heirs and executors of estates that have real estate involved. Here is a recent question I received.

Question: If we don't accept the offer (from a buyer) and let the bank have the house, (which has a) $73,000 mortgage, will I be free and clear?
Question Detail: I am having an auction of my father's estate. If we don't accept the offer and let the bank have the house, (which has a) $73,000 mortgage, will I be free and clear? I am the executrix. Will it affect my credit?

My Answer: 

If a bank forecloses on a property and obtains less than what is owed for the property at a foreclosure sale, then the bank may pursue an action against the mortgagor for the balance owed under the mortgage agreement.  If the mortgagor is deceased, then the bank can pursue action against the estate.  Whether the bank will actually decide to pursue the amount remaining unpaid, if any, depends on the amount left unpaid and the policy of the bank. 

As long as you and the estate are kept separate, any action against the estate should not affect you individually. However, the bank might try to name you individually in a suit. Even if it does not do so, it is possible that there might be a mistake made by a credit reporting company that confuses you as executrix with you individually.  This should not happen, but it might, so while your credit should not be affected by an action against the estate, there is a chance it might affect your credit.  

Disclaimer: The above is intended as general information and your specific situation may be different so it is always important to speak with a lawyer about your specific situation.

For further information, visit our website at:

MarkWeinsteinLaw.com