PHOENIX, ARIZONA, UNITED STATES, April 5, 2018 /EINPresswire.com/ — A foreclosure is a situation when the lender takes back the possession of the house from the borrower who is not able to pay the mortgage payment and sell it off to recover his money. There is a bidding which takes place at the auction when the lender sets the house on sale at a discounted price and the one who bids the highest at the auction gets the title transferred to him. Buying a property in Foreclosure is a golden opportunity for an investor or a buyer as huge profits can be made on the property which one gets at great discounts.
On the other hand, at the same time, it is a sad experience for a homeowner as he has to give away his house to the lender being unable to pay the mortgage payment. The situation can be worse if the lender wants to collect money from you even after the foreclosure. Read on to more about it, various terms involved and what can be done.
If a borrower is no longer able to pay the mortgage payment the lender follows the foreclosure process to take back the house and sell it off in order to recover his money. It can happen that the total debt which the borrower owed was more than the foreclosure sale price i.e. the price at which the house was sold and the money which the lender got. This difference between the sale price of the house and the debt which the borrower owes is known as the deficiency after a foreclosure.
What is A Deficiency Judgment?
When there is deficiency after a foreclosure, lenders often have the right to pursue the borrowers for a deficiency judgment to recover their deficient amount. It is a very unfortunate situation for the borrower who already lost his home and still owes to the lender.
Typical Techniques to Collect Money
If the lender wins the deficiency judgment the borrower is liable to pay the amount of the judgment and is legally obligated to do so. If he doesn’t pay, the following are the typical techniques through which a lender can collect money from the borrower:
• Wage garnishment: In this, the lender takes a portion the borrower’s wage till his debt gets cleared.
• Bank levy: In this, the lender takes cash from the borrower’s bank account to reduce the debt that the borrower still owes.
• Liens: By putting liens on the property the lender can take a legal interest in the things that the borrower owns.
How Can You Save Yourself?
You can save yourself from the liability to pay the money to the lender is asking for by going for the following options:
Filing for Bankruptcy which helps to eliminate the debtor’s personal liability for mortgage deficiencies. It prevents the lender from going for a deficiency judgment and if already entered then he has to stop asking for money any further.
But keep in mind that filing bankruptcy doesn’t set you free from the security interests as the liens attached to the property at the time of filing will remain. So, file for bankruptcy before the liens get attached.
• Filing Chapter 7 bankruptcy: It helps in providing complete discharge of most of the debt
• Filing Chapter 13 bankruptcy: In this, the borrower pays back a portion of the debt in a tie period of 30 to 36 months and the rest is discharged.
Other options: These include the following which can be used to eliminate deficiency judgment after or during a foreclosure:
• Negotiating waiver with the mortgage company
• A deed in lieu of foreclosure
• A short-sale
• Reopening the judgment
• Challenging the valuation
Also, don’t hesitate to consult an attorney and take legal help to save yourself from this liability.
So now that you know what all can follow a foreclosure, carefully weigh the situation, know your rights and the options that you have before boiling down to the decision to lose your home to a foreclosure. And yes, don’t worry, just know the options you have so that you can protect your possessions and avoid financial damage that may follow. Then the lender cannot follow you forever to collect the deficiency judgment!
Avi Meir Zaslavsky
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Source: EIN Presswire