When a home is sold during foreclosure in Fairfield, OH for less than what is owed on the mortgage, the difference between the loan amount and the sale price is referred to as a deficiency. In most areas, lenders can pursue borrowers for the difference; if the lender is awarded a deficiency judgment, the lender can garnish wages or freeze their bank account until the judgment is paid. Read on to learn more about deficiency judgments, as well as to get tips on avoiding liability in these cases.
Are Deficiency Actions Allowed in All States?
Laws on deficiency judgments vary by state. Some states allow lenders free rein to seek judgment after a sale while others only allow judgment if the foreclosure in Fairfield, OH goes through the courts. Other limitations include prohibitions against a judgment in foreclosures on primary residences and limits on amounts recoverable in a deficiency suit.
Frequency of Deficiency Judgments
Because of the cost and time involved in a deficiency judgment case, and because of the fact that most borrowers are judgment proof, lenders sometimes opt not to pursue deficiency judgments. That fact offers little comfort to borrowers in foreclosure, and most want to know whether or not they’ll be held accountable. However, as lenders look for ways to recoup losses, these judgments are becoming commonplace.
Avoiding Liability in Deficiency Judgments
If a person is behind on their mortgage, and they accept that they’ll lose their home, they should call the servicer to find out whether they’re eligible for alternatives such as a deed in lieu or short sale. Whether a borrower and R. Dean Snyder Attorney choose a short sale or a deed in lieu, they should encourage the lender to provide a written agreement releasing them from further liability for remaining debt.
If a person is not able to do a deed in lieu or a short sale, and their home is sold in a foreclosure proceeding, seeking bankruptcy protection eliminates the homeowner’s liability for deficiencies. Although most wouldn’t file just to avoid paying a deficiency judgment, this is a worthwhile option for those already considering a bankruptcy. Here, the elimination of the deficiency judgment provides additional benefits.
