The Effects of a Foreclosure in VA

By Bill Herrfeldt

Foreclosures happen for a variety of reasons. For example, you suddenly lose your job and you have no wherewithal to pay your mortgage. Or you suffer a debilitating illness and the medical bills are more than you can handle, both financially and emotionally. If you live in Virginia, and the foreclosure of your real estate is imminent, it pays to know the effects that a foreclosure can have on your life.

With some exceptions, the equity in one's home goes up periodically. In addition, you'll continue making payments on your mortgage, thus reducing what you owe. You will be walking away from the combination of increased value and the reduction of your loan balance. Over time, this could amount to a loss of thousands of dollars.

When a lender recovers less from a foreclosure and sale than what he is owed, he is obligated to report that loss to the Internal Revenue Service. That loss represents ordinary income to you and you will possibly owe taxes on the amount.

In Virginia, a lender can sue you for the balance of what you owe after the proceeds of the real estate sale are applied.

A foreclosure has a devastating effect on your credit rating. It will appear on your three credit reports for about seven years, during which time you will have trouble getting new credit; and if you do, you are likely to pay dearly for it. Furthermore, your bad credit will impede your ability to rent an apartment and it might even affect your ability to find employment.

Many employers have turned to credit reports to determine the long-term worth of an employee. In some cases, when they are aware that an employee has been foreclosed upon, employers have the right to terminate that employee. Even if you do keep your job, the foreclosure could hinder your advancement.

Going through foreclosure can have a serious effect on your emotional well-being and possibly your health. You can become depressed and develop a feeling of less worth which can lead to a lack of motivation and even serious physical problems. If these begin happening to you, seek professional help.

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