Legal Question in Real Estate Law in Virginia

Re: quitclaim deed/forecloser/bankrupsty

In California, the bank may not come after a borrower on foreclosing a purchase money mortgage. In fact, by law since their only recourse in California is to the land, I believe they cannot even put that on your credit. You need to find out from someone in Virginia what the laws are there. There might be steps you could take to protect yourself in Virginia - but you may have to act now. Do not delay. Good luck.

NOTE: Please understand that the information provided in this reply is for informational purposes only and does not create an attorney-client relationship. It also may not be complete. Before you make any decision that might possibly have legal implications, you should consult with our office, or another qualified professional, in a manner that provides for thorough communication so that thorough legal advice can be provided in a manner that relates to your specific circumstances. Thank you.

Reply Posted By:

Wayne V.R. Smith

Attorney at Law

P.O. Box 3219

Martinez CA 94553

[925] 228-5232

Re: quitclaim deed/forecloser/bankrupsty

Your question raises issues of both California and Virginia law, maybe more of the latter, and as a California attorney I will suggest some questions you might put to a Virginia lawyer.

First, California has so-called antideficiency statutes. A real-estate lender often must look only to the collateral itself and cannot come after the borrower if the foreclosure proceeds don't make the lender whole. Unfortunately, I think Virginia is much more permissive in allowing actions for deficiencies.

Second, however, if the Virginia property has sufficient equity to pay the lenders, there is no deficiency.

Third, how much of the debt on the Virginia house are you liable for? You may still be liable for the loan or loans that were on the house at the time of the divorce, but you may also have a claim against your ex to be made whole under your property settlement. Small consolation if he's broke, but keep it in mind, and review the terms of your divorce decree.

Next, you would most likely not be responsible for any debt incurred by your ex-husband after entry of your final divorce decree.

Transferring assets to avoid, hinder or delay creditors is fraud, and you could get into big trouble doing that.

I advise you to research the economics of the house situation in Virginia. Find out what the house is really worth (after selling expenses) and how much is owed on the loan or, perhaps, the several loans on it. Find out which of the loans you are liable on, and what their priority is in application of sale proceeds.

It would also be helpful to know whether the loans are mortgages or deeds of trust, and whether the foreclosure proposed is 'judicial' or by a trustee (rather than by a court).

The best way to find out the loan information, home value, etc. would be to contact professionals in the Virginia county where the house is located. You could consider using an attorney, an appraiser, and/or a real-estate firm. Probably better to use someone you know from your days back there, who you can count on to work on your behalf.

In short, the advice you've been given is too drastic and if followed would get you into another kind of trouble.

You need to collect better data about the Virginia situation before making any decisions.

Re: quitclaim deed/forecloser/bankrupsty

You may be able to bring the loan current, and then foreclose on the loan yourself, and then sell the property. Depends on Virginia law. Call their Bar association to get a referal.

Re: quitclaim deed/forecloser/bankrupsty

What the lender can and will do depends upon the loan documentation and whether the lender is relegated to Virginia law, etc. This is impossible to tell without reviewing the documents. Generally, if you are a borrower on the loan and you obtain a divorce and deed away your interest in the property securing the loan, the divorce has no impact on the loan and you continue to be liable for the loan. A foreclosure will definitely hurt your credit, but a bankruptcy will hurt it even more, so do not overreact and divorce your current spouse, etc. Also, if you transfer assets (deed away your current home) in order to avoid payment of a debt, that transfer can be set aside by the bankruptcy court anyhow; further, in California you could be liable for damages under fraudulent conveyance laws. Go to an attorney; you definitely need some specific advice based upon your specific situation and general advice through the iternet won't cut it.

Re: quitclaim deed/forecloser/bankrupsty

The foreclosing bank has the right to come after you for any deficiency on the loan following foreclosure. What this means is the difference between the loan balance and the sale price the property brings plus the costs of foreclosure. Not knowing how much that would come to, I cannot tell you how big of a concern you may have. The bamnk may wll bid it in at the loan balance if the fair market value of the house is 20-30 % greater. Before you take all the drastic steps you have suggested talk to a California attorney that has some bankruptcy experience !