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Information on Social Security Income being Levied in Case of Foreclosure - The Bills.com Blog
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Information on Social Security Income being Levied in Case of Foreclosure
Wednesday, Nov 19, 2008
Question: My spouse and I just did a voluntary repo on our mobile home...first I contacted the morgage company and told them we could no longer keep our mobile home, our home is on our son's property and we were told our kids were getting a divorce, therefore we had to leave...we were told the morgage company would refinance with a land package if we could find something with utilities...Our only source of income is #SS which is social insecurity to us! And refinancing would only make the payments higher and we could not afford the higher payments. We have our SS as a direct deposit can the morgage company get into our bank account and take away our only means of financial support?
Answer: From your question, I cannot determine if your home has been foreclosed upon and you have been evicted from the property, or if you are still living in the residence while the foreclosure process is underway. You first say that you “did a voluntary repo,” which I would normally take to mean that you are no longer in possession of the property; however, you later talk about your efforts to refinance the home, which makes me think you are still living in it and that the foreclosure process has not been finalized. If your mobile home has already been repossessed then the recourse available to you to reclaim the property is somewhat limited; many states offer individuals whose homes have been repossessed a “right of redemption,” allowing former owners to reclaim their property. However, in order to redeem your property, your would likely be required to pay off the entire balance of the loan on your mobile home, in addition to any cost of foreclosure, legal fees, and other costs incurred by the lender in its efforts to enforce your loan agreement, all in a single lump sum. Occasionally, a home owner can find the necessary funds to redeem his property, but for the vast majority, redemption is an infeasible option due to the high cost. Not all states allow former home owners to redeem their properties, so if you are interested in pursuing this option, you should consult with an attorney in your state to discuss your rights in this situation. To read more about the specific foreclosure laws in your state, you can visit this page .If you are still in possession of the property, you have various options available to you to retain your mobile home. For example, you can continue trying to find an affordable refinance loan to assist you in bringing your current obligation current. I know that you have spoken with your current lender about the possibility of refinancing your loan, and have determined that your new payments would be too large for you and your spouse to manage on your limited income. Although you may not be
able to refinance with your current lender, you should definitely shop around with various other lenders to try to find more affordable loan programs that will help prevent foreclosure of your home. Bills.com offers a wealth of information for consumers looking to refinance their properties, available online at http://www.bills.com/refinance-my-home/. You may also wish to consider selling your mobile home before your lender proceeds with foreclosure. If you think that you cannot sell the property for what you owe on your loan, you should contact your lender to ask if it would consider allowing you to sell the home for less than the full balance of your loan; this type of transaction is generally called a “short sale.” A short sale can benefit consumers, allowing borrowers who can no longer afford their property to avoid foreclosure while also ridding themselves of their burdensome loan obligations. You will need your lender’s approval before proceeding with a short sale, so if you are interested in this option, you should contact your lender as soon as possible to discuss your predicament.
I generally encourage homeowners to try to avoid foreclosure if possible, as a foreclosure can result in credit problems and additional financial difficulties for consumers. However, if you are unable to prevent foreclosure, or if your lender has already taken possession of your home, you will now need to focus on how to minimize the negative impact of foreclosure \ on your financial future. The primary problem which arises for most people after a foreclosure is that they may still owe a significant amount of money on their foreclosed loan, even though they no longer own the property. When any property is seized by a lender, be it land, a car, or a mobile home, the lender will generally sell the property at auction, frequently for much less than market value. The lender will then apply the proceeds of the auction sale to the balance the borrower owes on the original loan; if the auction proceeds do not fully compensate the lender for the balance of the loan, the borrower may be liable to the lender for the difference, which is generally called a “deficiency balance.” Whether or not you will be liable for any deficiency balance which results from the foreclosure of your mobile home will depend on your state’s laws; most states allow lenders to collect deficiency balances,
I generally encourage homeowners to try to avoid foreclosure if possible, as a foreclosure can result in credit problems and additional financial difficulties for consumers. However, if you are unable to prevent foreclosure, or if your lender has already taken possession of your home, you will now need to focus on how to minimize the negative impact of foreclosure \ on your financial future. The primary problem which arises for most people after a foreclosure is that they may still owe a significant amount of money on their foreclosed loan, even though they no longer own the property. When any property is seized by a lender, be it land, a car, or a mobile home, the lender will generally sell the property at auction, frequently for much less than market value. The lender will then apply the proceeds of the auction sale to the balance the borrower owes on the original loan; if the auction proceeds do not fully compensate the lender for the balance of the loan, the borrower may be liable to the lender for the difference, which is generally called a “deficiency balance.” Whether or not you will be liable for any deficiency balance which results from the foreclosure of your mobile home will depend on your state’s laws; most states allow lenders to collect deficiency balances,
though there are notable exceptions. For example, California generally does not allow for the collection of deficiency balances on many loans for the purchase of real property. I strongly encourage you to consult with an attorney in your area to discuss what action the creditor can take against you after it forecloses on your mobile home.
Even if you do owe a deficiency balance after your mobile home is sold by the lender, it may be difficult for the lender to actually collect on the debt. Thankfully, Social Security benefits are almost always exempt from creditor attachment; even if the creditor obtains a judgment against you, it should not be able to garnish your Social Security payments. SS benefits also retain their exempt status when they are deposited into a bank account, so the lender should not be able to seize social security proceeds in your bank. That said, some judgment creditors will try to levy social security proceeds in a bank account, requiring the bank to freeze your account, and forcing you to file a motion with the court that granted the judgment to have your exempt funds released. In order to reduce this risk, you may wish to speak with your bank to put it on notice that the only funds being deposited into your account are from Social Security. In addition, you may want to keep your S.S. funds in a separate account from any non-retirement income you receive, as commingling exempt funds with non-exempt funds can make proving an exemption much more difficult if you ever needed to do so. Please remember that a creditor cannot try to levy a consumer’s bank account until it has filed a lawsuit and obtained a court judgment against the consumer. Most creditors do not seek legal action against debtors simply because it is often prohibitively expensive, so you will likely never need to worry about a bank levy. However, I encourage you to consult with an attorney in your state to discuss your state’s laws and to determine the potential consequences of not paying this debt. For more information for consumers who are struggling with their debts, I encourage you to visit the Bills.com Debt Help page.
I wish you the best of luck in resolving the difficult situation you are facing with your home, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Even if you do owe a deficiency balance after your mobile home is sold by the lender, it may be difficult for the lender to actually collect on the debt. Thankfully, Social Security benefits are almost always exempt from creditor attachment; even if the creditor obtains a judgment against you, it should not be able to garnish your Social Security payments. SS benefits also retain their exempt status when they are deposited into a bank account, so the lender should not be able to seize social security proceeds in your bank. That said, some judgment creditors will try to levy social security proceeds in a bank account, requiring the bank to freeze your account, and forcing you to file a motion with the court that granted the judgment to have your exempt funds released. In order to reduce this risk, you may wish to speak with your bank to put it on notice that the only funds being deposited into your account are from Social Security. In addition, you may want to keep your S.S. funds in a separate account from any non-retirement income you receive, as commingling exempt funds with non-exempt funds can make proving an exemption much more difficult if you ever needed to do so. Please remember that a creditor cannot try to levy a consumer’s bank account until it has filed a lawsuit and obtained a court judgment against the consumer. Most creditors do not seek legal action against debtors simply because it is often prohibitively expensive, so you will likely never need to worry about a bank levy. However, I encourage you to consult with an attorney in your state to discuss your state’s laws and to determine the potential consequences of not paying this debt. For more information for consumers who are struggling with their debts, I encourage you to visit the Bills.com Debt Help page.
I wish you the best of luck in resolving the difficult situation you are facing with your home, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Deborah on Tuesday 16th December 2008 19:12
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Deborah
2. Posted by pau on Friday 9th January 2009 00:03
The bank can deny a levy when it is recieved, they have to fill out a memorandum of garnishee. it can be filled out stating the funds will not be released to sheriff do to funds being SS deposited funds. most banks I have read about freeze account so they can collect a 100 to 200 dollar fee. this is in California
3. Posted by Bill on Friday 9th January 2009 06:08
Thanks Pau for the input! Keep writing and helping people on the Bills blog.
4. Posted by Edward on Friday 20th November 2009 04:30
I read what was written by the responder and it takes us on a trip to Neverland before it answers the question. The only response requested was whether or not foreclosure will somehow allow the lender the right to garnish social security benefits? The answer seems to be no.