Suppose you had your home auctioned at a foreclosure sale and the sale amount happens to be lesser than the loan money you owe your lender, your lender can sue you for this difference or deficiency within a specified number of days after the foreclosure sale. You can also be ordered by the court to make up this difference. Of course, depending on where you live, a deficiency judgment may not be the automatic next step following a mortgage foreclosure. After the foreclosure sale, your lender will have to file for a deficiency judgment. You can avoid this if you are able to provide proof that the sale price was equal to the market value of the property as on the sale date. This can be done via an appraisal of your home or other legitimate endorsements of its value.
If you are worried about your lender getting a deficiency judgment, then the best thing to do is contact an attorney to discuss asset protection strategy with the help of Land Trusts, Personal Property Trusts, etc. This will at least help you make it tough for your creditor to relieve you of your property, making them think twice about filing for a deficiency judgment.
The good news is that the bank cannot touch your IRA, 401(k), 403(b) and other retirement funds. On the other hand, if you used these to buy another property or asset, the bank can claim these funds. The reason for this is although creditors cannot claim retirement accounts, they can claim investment assets without special designation.
Thus, the best thing to do is talk to your lender about a short sale rather than going in for a foreclosure. If he agrees, you can prevent a deficiency judgment.
Another advantage with a short sale is that it can improve your credit, as it will feature as a ’settled debt’. Of course, it all depends on what your lender agrees to, so talk to him about it to establish how it will figure on your credit report and preferably get it in writing.
A short sale means the loss of your home. You can refer to online resources like StopForeclosureBlog.net for solutions to help you keep your home as well as for valuable resources like articles, videos and guides that will help you prevent foreclosure.
A majority of mortgage companies prefer not to file a deficiency judgment against you for good reason. They are aware that a foreclosure does not spare you any funds to pay the deficiency judgment and court fees and therefore, it would be futile for them to waste their time, money and efforts over this.
