Legal Question in Bankruptcy in Pennsylvania

Re: Bankruptcy/foreclosure

When you obtain a home loan, there are two significant documents you sign. One is a promissory note and the other is a mortgage. The former evidences the debt and creates a personal obligation on your part. The latter creates a lien on the property such that failure to pay enables the mortgage company to obtain the property through a sheriff's sale.

It is common in a divorce case to deed real estate to a spouse who then indemnifies you. That means that, if the mortgage company attempts to collect the debt from you, you can sue your ex-spouse. However, you are still liable for the debt.

Usually, when a mortgage company forecloses on a residential mortgage (seeks to obtain ownership through a lawsuit and sheriff's sale) they are content to simply obtain the deed. Because of a law known as the Deficiency Judgment Act, it is unlikely that they will pursue anyone personally.

Of course, the foregoing is not true if there are other mortgages on the property. In that case, those mortgages that were recorded after the first mortgage, will be divested from the property. Consequently, with no lien and no property, their only option is to pursue anyone who signed a promissory note. That would be you.

If you have any other debts that you are unable to pay, there are options available to you and you should speak to a bankruptcy practitioner promptly. Such a person can advise you on all your options, not simply bankruptcy.

I trust this has been helpful, but feel free to call or e-mail with further questions.