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Knowledgebase Home | Favorites | Forum Welcome to our knowledge base. To find what you're after, use the search box below or choose a category to view listed articles. Search the Knowledgebase Browse by Category [Advanced Search] -- Select Category -- Credit MythbustersLoans    - Personal Loans    - Auto Loans    - Home Loans    - Student LoansCredit CardsCredit Reports and ScoresCredit Report CardIdentity TheftDebt HelpConsumer Law Guide    - College Cost Reduction and Access Act    - Credit Card Accountability Responsibility and Disclosure Act (CARD Act)     - Credit Repair Organizations Act (CROA)    - Equal Credit Opportunity Act (ECOA)    - Fair and Accurate Credit Transactions Act (FACTA)    - Fair Credit Reporting Act (FCRA)    - Fair Debt Collection Practices Act    - Overdraft Rules for Debit and ATM CardsCustomer Support The article has been updated successfully. Knowledgebase Home > Debt Help What’s foreclosure? Article Details Last Updated 18th of February, 2010 Would you like to... Discuss Print this page Email this page Post a comment Subscribe me Add to favorites Remove Highlighting Edit this Article Quick Edit Export to PDF User Opinions (3 votes) 66% 33% How would you rate this answer? Helpful Not helpful Help us improve. Why was this unhelpful? Thank you for rating this answer. Foreclosure is a legal process that permits a creditor (a lender or mortgage holder) to repossess and sell real property (like a condo, a home, or land) for the purpose of repaying the debt owed on the property. Mortgage holders are permitted to foreclose on property anytime after the borrower defaults on the mortgage, unless otherwise set out in the mortgage or in the laws of the state where the property is located. In no-recourse states, foreclosure actions can wipe out some of the property owner's debt, like the original mortgage (taken out at the time of the home purchase), HELOCs, and second mortgages. However, owners are still obligated to pay off HELOCs and second mortgages in full if they are not paid out of the foreclosure proceeds. The Bad News about Foreclosure If there is no insurance (e.g. PMI) that covers the difference between what is owed on the property and what it was sold for, a court could enter a deficiency judgment against the property owner if the property is not located in a no-recourse state. Deficiency judgments obligate the property owner to repay the difference and give mortgage holders the right to collect the remainder of the debt owed from any other assets the property owner may have. There can also be tax consequences of foreclosure. When a debt is forgiven in a foreclosure action, the forgiven debt is considered income. That means that the taxpayer or property owner not only loses the property, but he may also owe taxes on the difference between what was paid for the property (the value of the home) and what is owed on the mortgage (but forgiven in the foreclosure action). Foreclosures will stay on your credit reports for seven years. Read about why a short sale is better than foreclosure, even though they are both bad for your credit scores. Also, if you’re having trouble paying your mortgage because you are in debt, you can talk to a debt expert and get free debt consolidation. Another good option is Mortgage Loan Modification. Related Articles How long do foreclosures or repossessions stay on your credit reports? What is a nonrecourse loan? Which is better, a short sale or foreclosure? What’s a short sale? I heard that there's a new change in loan modification reporting that will help consumers; what is the latest? Continue