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Deficiency Balance & Home Foreclosure Advice

I need Deficiency Balance and Home Foreclosure Advice!

If we will have judgment from a lender against us how can we can protect a second property in a different state from the creditors?

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Bill's Answer
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Given the complexity of the financial difficulties you are facing, I strongly encourage you to consult with an attorney licensed in Ohio (and possibly one licensed in the state in which you own property), to discuss the possible consequences of allowing your home to go into foreclosure. An experienced attorney should also be able to tell you what options, such as a loan modification, short sale, or even bankruptcy, may be available to assist you in resolving your mortgage issues. To read more about foreclosure, and the various actions consumers can take to mitigate the damage caused by foreclosure actions, I encourage you to visit the Bills.com Foreclosure page.

You state in your question that you will be unable to make your mortgage payments after twelve months, so unless you are able to sell the home, you may be forced to allow the home to go into foreclosure. When a home is foreclosed upon, the mortgage lender usually auctions the property at a foreclosure sale, applying whatever amount is received at the foreclosure sale to the balance owed on the mortgage. In many cases, the sale price at auction is not sufficient to cover the mortgage and other secured liens on the property, such as home equity loans; the difference between what you owe on the property and what the lenders actually receive is called a deficiency balance. In Ohio, as in most other states, mortgage lenders can pursue borrowers for deficiency balances resulting from foreclosure.

Quick Tip
Each state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

Since you state that you are already "upside down" on the mortgage, it is likely that a deficiency balance will result from the foreclosure on your home, which the lender could attempt to collect. Its collection efforts could range from simple collection calls and letters all the way to filing a lawsuit against you for the balance owed. If the creditor does try to sue you, and if the court grants it a judgment against you, the creditor may be able to garnish your wages, place levies on your bank accounts, and place liens on your property. The lender may also be able to force the sale of your second home in order to pay off its judgment, though it will likely be more difficult for the creditor to seize your second home since the property is located in a different state. In order to execute against assets located in another state, the judgment creditor would need to file a "motion to domesticate" its Ohio judgment with the courts of the county in which the assets are located. Unless the court has reason to believe that the judgment was granted in error, it is likely that the court will domesticate the judgment, allowing the creditor to enforce its judgment in both states. Once the judgment is domesticated, the creditor may be able to force the sale of your property in order to pay off the Ohio judgment.

While it is possible for the creditor to enforce its Ohio judgment outside of the state, you should know that it is relatively uncommon for creditors to pursue the costly and time consuming legal process of domesticating a judgment and forcing sale of property.

Even if the creditor does know about your out-of-state property, you should have ample warning if the creditor is attempting to seize the property, which will hopefully give you time to take the necessary steps to protect your assets. For example, you may be able to work with the creditor to repay the debt to prevent the negative consequences of the creditor’s collection efforts. From my experience, most mortgage and home equity lenders are willing to offer flexible repayment terms to borrowers who have defaulted on their loans. However, if you find that the deficiency balance claimed is too large to pay off within a reasonable time frame, or if the creditor is unwilling to work with you to establish workable payment terms, you may wish to consider filing for bankruptcy protection to resolve your deficiency balance. I strongly encourage you to consult with a qualified attorney in your area if you are considering filing for bankruptcy protection. In addition, I invite you to visit the Bills.com Bankruptcy page.

Quick Tip
Debt distressing you? The Bills.com Debt Coach is a no-cost online tool that will analyze your debts and show you the options available to resolve them and the costs and benefits of each.

I wish you the best of luck in resolving the problems you are facing with your mortgage loans, and I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

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6 Comments

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  • BA
    Oct, 2009
    Bill
    Generally speaking, if a debtor is foreclosed on Property A, that will not trigger a foreclosure on Property B, C, or D. To learn more about South Carolina's mortgage laws, see "South Carolina Code of Laws: Title 29 - Mortgages and Other Liens." As I understand SC law, SC is a recourse state, which means the homeowner is responsible for any deficiency balance due in default or foreclosure. A deficiency balance is an unsecured debt. To learn more about your rights, see the bills.com resource "Collections Agencies, Collections Laws and Your State's Statute of Limitations."
    0 Votes

  • 35x35
    Oct, 2009
    Dave
    I live in South Carolina and had a question about foreclosing on a home. If I am the only person on the deed with one home but am part owner o another home and I foreclose on my home will that have any effect on the home that I share? And also if youforeclose o a home can you bank accounts be garnished? Thanks and looking forward to getting a response.
    0 Votes

  • 35x35
    May, 2009
    Sammy
    If your mortgage was discharged in your bankruptcy case, and you have not signed a reaffirmation agreement with the lender, then you likely would not be liable for any deficiency created by the sale of your home, since you may have, at least theoretically, already voided the mortgage agreement by discharging the obligation in bankruptcy. You should consult with your bankruptcy ttorney about this situation to determine your level of risk. As for your wife, if she did not sign the mortgage note, then she should not be liable for any deficiency balance, or any other charge related to te mortgage agreement you signed. The foreclosure should not appear on her credit as she is not liable for the mortgage debt.
    0 Votes

  • JB
    May, 2009
    Jason
    My home is being foreclosed on June 2, 2009. I am trying to find a way to save my home, but unfortunately I am running out of time. My lender told me that due to my bankruptcy that was discharged in Feb 09, I am not legally bound to the mortgage. Does that mean that if there is a deficiency at the time of sale at the auction, will I liable for the deficiency? Lastly, my wife is not on the mortgage, but she is on the deed; will she be liable for the mortgage or the deficiency? Will the foreclosure show up on her credit?
    0 Votes

  • 35x35
    Feb, 2009
    Sam
    First, I strongly encourage you to consult with your bankruptcy attorney regarding these issues; since I do not know the details of your case, and am not licensed to practice law in your state, I cannot give you any specific legal advice, which is what you need given the potential consequences of failling behind on your house notes. Once you reaffirm on your mortgage loans, you will be responsible for making all payments outlined in the reaffirmation agreement, as you were required to make your regular mortgage payments before you filed for bankruptcy protection. If you are unable to make your mortgage payments under the reaffirmation agreement, your lenders will likely proceed with a lawsuit to foreclose on your property. Although you received a discharge in your bankrutpcy case, if you wish to keep your home, you will almost certainly need to continue making your regular mortgage payments on time each month. Your mortgage lenders may be willing to work with you to reduce your interest rate and monthly payments, along with other possible concessions. You will need to contact your lenders to discuss any possible loan concessions they can offer to help make your loan payments more affordable. Hopefully, your lenders will be willing to work with you to reduce your payments. Even if your lender is unwilling to reduce your payments, you will still be responsible for keeping your loan payments current if you wish to keep your home out of foreclosure. Indiana law allows lenders to pursue former homeowners for payment of any deficiency balance remaining after the home is sold at a foreclosure auction. If you find that you are unable to make your mortgage payments and are facing foreclosure, you may be able to petition the bankruptcy court to reopen your case to include your mortgages, allowing you to surrender the home and discharge the obligations. While you would lose your home in this scenario, you may be able to avoid a deficiency balance. Again, I encourage you to contact your bankrutpcy attorney to discuss the difficulties you are having with your mortgage payments; your attorney should be able to tell you what options are available to help you and what steps you should take to try to prevent the foreclosure of your home. I wish you the best of luck!
    0 Votes

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