A deficiency judgment is a judgment that a mortgage lender obtains against a debtor after a foreclosure. If the foreclosure does not generate enough income to pay back the mortgage loan in full, the mortgage lender can obtain a deficiency judgment to try to recover the unpaid balance from the homeowner who has been foreclosed on.
A deficiency judgment is often a major problem for homeowners, who could end up owing thousands of dollars on a home that they no longer own. An experienced bankruptcy and debt relief attorney at Ronald D. Weiss, P.C. can provide assistance to homeowners in exploring options for avoiding or eliminating deficiency judgments including short sales and bankruptcy. Call today to schedule a consultation and learn more.
Understanding a Deficiency Judgment
The sale of a foreclosed home sometimes does not generate enough money to pay back a lender for the full amount of debt that is owed. For example, if a home is worth $250,000 and sells for this amount but the mortgage on the house is $300,000, then the mortgage lender will recover $50,000 less than he is owed after foreclosing. The lender will also incur costs and fees associated with the foreclosure and the sale of the home.
The lender can seek a deficiency judgment from the debtor who was foreclosed on for the unpaid balance. Lenders do not always do this, and this is not permitted in all states. However, when a lender does obtain a deficiency judgment, it is very damaging to the homeowner.
A deficiency judgment can have a significant adverse impact on your credit score, compounding the harm that the foreclosure has done. The lender can also pursue options to collect the funds that are owed, such as seeking a court order to have your wages garnished or having a lien put on other property you may own. This means you may have a portion of your paycheck taken and paid directly to the lender and/or you may be unable to sell or transfer other property that you own.
Avoiding a deficiency judgment should be a top priority for debtors. Homeowners may negotiate a short sale or a deed-in-lieu of foreclosure agreement and have the lender waive the right to obtain a deficiency judgment as a condition of the agreement. Homeowners may also be able to have the deficiency judgment discharged in a bankruptcy proceeding.
If you are facing a deficiency judgment, contact Ronald D. Weiss, P.C. We can help you to understand your options and to avoid having to pay for a home that you no longer possess. Call today to learn more.