Understanding a Deficiency Judgment: What Can Happen After a Foreclosure

Understanding a Deficiency Judgment

This guide explores the basics of a deficiency judgment, which can occur after a home or other property foreclosure.

Going through a foreclosure can be a painful time, but foreclosing on a home or property may not be the end. There is one potential issue at the end of foreclosure and its name is a deficiency judgment. 

What is a deficiency judgment? What can you do to prevent it or fix it? 

Let’s go through the details below. 

What is a Deficiency Judgment 

A deficiency judgment is a legal order that you may receive if a debt you have incurred is still not paid in full. 

If your property has gone through foreclosure because of an inability to make payments on your loan, it may not be enough to erase your debt.

The lender will sell your property to pay off your debts, but if a significant amount remains, then the lender may opt to try and get the rest of your payments through a deficiency judgment. 

The order will come through legal proceedings and if it passes, you will be liable for the remainder of the debt, known as the deficiency.

What Can Happen To You

The process of a deficiency judgment can be frightening and can add a great deal of stress to an already bad situation. 

You can make payments as stated in the judgment. If not, here is what you may expect from a deficiency judgment. 

1. Wage Garnishing

Wage garnishing involves a portion of your paycheck getting deducted. This portion of your paycheck goes to paying off your debt. 

2. Levying Your Accounts

If your bank account has a certain amount of money in it, a deficiency judgment may take payments from said bank account.

There may be some restrictions on how much a deficiency judgment can remove. It depends on the debt owed, your income, and the amount in your account. The court agreement will discuss this in detail. 

3. Liens On Other Property Pieces

A lender may look towards other property items you own to take as payment for the debt owed. This is called a lien

This is often only used in commercial dealings. Personal items such as your home, cars, and other essentials may have some form of protection in these dealings depending on the other circumstances.

4. Money Requests

Often the first line of attack, or if you have no other way to pay, a lender may contact a debt collector. This can even happen long before a deficiency judgment comes along. 

While you can opt-out of contact by a debt collector, it may push a lender to a deficiency judgment or harsher action. 

What May Happen and What to Do

A deficiency judgment is far from an absolute item that may happen. Legal costs can be expensive, so if the debt is not high enough to make the costs worthwhile, you may avoid any action on your lender’s part. 

If your lender does intend to go to court for a deficiency judgment, it may be in your best interest to seek legal aid

Getting the Legal Help You Need

Dealing with a deficiency judgment can be a harrowing experience but it isn’t one you have to go into blind and without guidance.

For other information regarding foreclosures and other legal issues, look into our other legal guides. Information can save you a lot of frustration and money in the long run.