Should I Stop Making Mortgage Payments?
Considering strategic default in a Texas bankruptcy
By S.M. Oliva | Last updated on January 10, 2023Use these links to jump to different sections:
For many Texas residents, their home is not just a place to live, but an investment. Unfortunately, like all investments, homes run the risk of loss. Over the lifetime of the typical 30-year mortgage, property values in the area may fall dramatically, leaving the homeowner with an outstanding mortgage debt that exceeds the fair market value of their real estate. In addition, a sudden change in personal finances (e.g., a loss of employment or an unexpected illness) can leave the homeowner unable to afford the loan payments on their now-underwater home.Can a Texas Lender Seek a Deficiency Judgment?

Can Filing for Chapter 7 Help?
Bankruptcy is also an option if you are faced with a deficiency judgment that you cannot afford to pay. In a Chapter 7 bankruptcy, most (if not all) of your unsecured debt is liquidated. This includes a deficiency judgment, since it represents that portion of your debt that is no longer secured by the house, which has already been sold. Keep in mind that both strategic default and filing for Chapter 7 bankruptcy will have a serious negative impact on your credit. Not only will your credit score drop, but, if your mortgage was backed by Fannie Mae, you will not be eligible for another government-backed loan for seven years following your foreclosure. And even if you plan to just rent going forward, a landlord will likely review your credit report, and may reject your application based on past history. For more information on this area of law, see our bankruptcy overview.What do I do next?
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