Foreclosure is the legal process where the lien holder, typically a lender such as a bank, obtains a court order terminating the mortgagor’s equitable right of redemption. Typically, the lender has obtained a security interest for the borrower. In real estate, it is typically the asset like a house that secures the loan. When the borrower defaults on the loan, the lender will attempt to repossess the property that has been pledged to secure the loan. The lender will seek to foreclose the equitable right of redemption.

The typical violation of the mortgage is a default in the payment of the promissory note, secured by a lien on the property. When the foreclosure process is complete, the lender will sell the property and pay off its mortgage and any legal costs. Many individuals believe that if the property is foreclosed, that terminates their obligation to pay the balance of the loan. They are mistaken. The bank can file a claim for a deficiency judgment and force the borrower to pay the balance of the promissory note. If you file chapter 7 bankruptcy, you may be able to discharge this debt. If the borrower was required to pay Private Mortgage Insurance, the insurance requirements may be sufficient and the borrower would have no further obligations associated with that property.

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