Many experts state that there are a number of criteria to consider in this situation:
How the house was handled in the bankruptcy?
Was it a seize-able asset or was it exempted (about $43,000 for married couple – Ohio)?
Is there a mortgage or loan or lien against the house?
Did the debtor reaffirm the mortgage or loan debt on the house?
Was the debt on the house clearly stated as being discharged in the bankruptcy papers
These same experts also state that
… If the house has a mortgage
… If the debtor did not reaffirm that mortgage debt
… If the house was exempted in the bankruptcy
… If the house was not seized, not listed on assets the trustee wish to liquidate
… If the house mortgage remaining debt was clearly and overtly listed as debt that was discharged in bankruptcy
then the mortgage company cannot file for a deficiency judgment. In fact, by doing so say these experts, the mortgage company is in fact itself in contempt of the courts, and if the debtor pursued, reopened the bankruptcy, and filed a complaint against the mortgage company, the mortgage company would be facing stiff fines. Prior to the discharge papers being filed by the trustee, at the beginning of the bankruptcy process, the trustee assigned by the courts is required to conduct a hearing under the provision of section 341 of the Federal Bankruptcy laws. This hearing is known as the “341 hearing”, so named by this provision. At this hearing the trustee has the debtor and creditors in the audience. The trustee collects all pertinent data around the debtor’s assets and liabilities, questioning the debtor who is under legal oath. The creditors are also allowed to ask questions of the debtor. Once this hearing is completed, the trustee can examine all of the assets listed by the debtor, as well as review all of the credit documentation of the creditors. The trustee must now list exemptions that federal and state law allow against each listed asset, list the asset that trustee wishes to be seized, list asset that will not be seized, and write all of this up for review by the courts and the creditors. The creditors have a limited amount of time to apply for complaint against the trustee’s written decision. This can lead to another court hearing to listen and adjudicate the complaint. Once all of this is done, the court eventually approves the discharge. If the house was not seized, but the debt not listed as discharged, then the creditor can resume pursuit of its money owed. If the house is foreclosed or abandoned or taken by “deed in lieu”, any debt unpaid by the subsequent sale of the house can be pursued be deficiency judgment.
One note on the above is that a mortgage results in a lien being placed on a person’s credit report(s). The lien does not go away. If the debtor’s personal liability is discharged, then the mortgage company has no options other than to foreclose and get what monies it can.