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HAS BEEN DESIGNATED AS A DEBT RELIEF AGENCY THAT HELPS PEOPLE SEEK RELIEF UNDER THE
FORECLOSURE IN NEW MEXICO
How Bankruptcy May Prevent Foreclosure or Limit the Negative Effects
Foreclosure is the process where a lender attempts to recover the balance of a
loan by taking the property back and selling it at auction. During any pay period
that a lender is not receiving payment, this will be reported to the consumer’s credit
report. When the payments have fallen far behind enough, the lender will file a lawsuit
in court to recover the property.
If the lender successfully regains the property through foreclosure, a sale will
be made, often within a smaller time window, to a much smaller number of eligible
bidders due to the auction’s restrictions on available funds. If the property sells
for less than what was owed on it, the former-owner is still responsible for the
deficiency amount, even though they no longer own the property!
This outcome of a short-sale may be similar to a foreclosure in the fact that a
person’s credit rating will take a significantly hit, the property will be taken
from them, and the consumer will often be left owing a debt on a property that they
no longer own.
Bankruptcy stops any foreclosure proceeding. It gives the power back to the consumer
to be able to make decisions regarding the residence. The consumer may release the
property and not be responsible for any deficiency amount, they may catch back up
the payments through a structured plan, or keep the residence outright and any equity
they may have in it.
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