DEAR BENNY: Our home is in the process of foreclosure. Bad economic times and the loss of work resulted in our failure to make two mortgage payments. The bank will not work with us to help solve this issue. What happens if a house is foreclosed by the bank? What are our responsibilities? Do we have to make up the difference in what is owed on the house? Your information will be greatly appreciated. –Louisa

DEAR LOUISA: I have been receiving many questions as to whether a homeowner who has been foreclosed upon has to pay any deficiency between what the house sells for and the then-outstanding balance. Unfortunately, each state has different laws; some completely disallow a lender from going after the homeowners who lost their house, while other states allow some form of deficiency. You will have to talk with an attorney in your state for this answer.

It is too bad that your lender will not work with you. But don’t give up. At a foreclosure sale, there are two possible “buyers.” One is a third party who is the successful bidder. The other — which apparently is the norm now in today’s difficult financial market — is the bank itself.

Either way, you will have to move out of the house. I would recommend that you personally attend the foreclosure sale (no matter how traumatic this may be) to determine who will own your house. You may be able to negotiate a rental for a period of time, so that you can at least stay in the house for a little longer.

Before the foreclosure sale, have you exhausted all available options? Does your state have any laws or programs that can assist you? Have you talked with a real estate agent about arranging for a short sale? Or have you discussed giving the property back to the lender so as to avoid the foreclosure sale; this is known as a “deed in lieu” of foreclosure.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.

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Filed under: Foreclosure, Legal Advice in Common Scenarios, Real Estate Market, Renting