Posted on: Wednesday, August 19, 2009

Deficiency Judgments Can Cause Lingering Grief

Deficiency Judgments Can Cause Lingering Grief
Author IconBy Paul M. J. Suchecki
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It’s all too easy to get disheartened about your mortgage difficulties and simply decide to pack up and walk away from your home, especially if your mortgage is now substantially greater than the value of your house.  However, abandoning a property does not always mean an unencumbered, fresh start. Your lender could pursue a deficiency judgment after foreclosure, where your bank sues you for the shortfall in the mortgage not covered by the sale of your home.

Only a handful of states disallow deficiency judgments: Delaware, Iowa, Massachusetts, Mississippi, Nebraska, South Dakota and West Virginia. Some like Alaska, Arizona Arkansas, California, Kentucky, Montana, North Carolina, and Oklahoma allow a short changed lender to bring suit against a borrower only under defined circumstances. If you are mulling the walk away option, it’s best to look into your specific state’s laws to see if you could still be liable for the balance of your debt after you’ve lost your home.

Practically speaking, many lenders will not take the time and trouble to sue you for a deficiency judgment.  You’ve moved from your residence, so the lender has to track down your current whereabouts for service of the court required documents. You’ve probably lost your property due to financial hardship, so the likelihood of recovering  any money is slim, yet this moribund economy will turn around someday. The last thing you need is to get back on your feet financially only to find a notice from your former lender demanding that  you show in court to repay tens of thousands of dollars in bad debt.

At MortgageOutreach.org, we are dedicated to preserving home ownership, but if you can’t sustain a house of your own, we urge you to approach your lender about a short sale, deed in lieu of foreclosure, or cash for keys. In all of these options, it’s useful to have your paperwork reviewed by a local low cost or free HUD approved housing counselor to ensure that you are not still liable for any debt.

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  • I read a few topics. I respect your work and added blog to favorites.

    Posted by: Cornelius on August 20, 2009 at 3:40 pm

  • Interesting and informative. But will you write about this one more?

    Posted by: Ventego on August 21, 2009 at 8:04 pm

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    Posted by: Silvia on February 17, 2010 at 9:13 am

  • AQtcxN I am always excited to visit this blog in the evenings.Please churning hold the contents. It is very entertaining.

    Posted by: Silvia on February 18, 2010 at 12:58 pm

  • I am always excited to visit this blog in the evenings.

    Posted by: Silvia on February 19, 2010 at 4:25 pm

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