A deficiency judgment is a legal judgment that a bank can obtain in some US states if a foreclosure does not satisfy the full amount of the mortgage debt. The bank can sue to obtain the judgment, which can then be enforced by various legal means. If the bank wins the judgment, the homeowner will have a negative credit rating for ten years and will be required to pay the difference between the amount owed to the bank and the amount obtained for the sale of the house. If the homeowner cannot pay, the court can impose a lien on their property or garnish their wages.
A deficiency judgment is a special type of legal judgment available in some US states. It is a legal judgment that a bank or lender can obtain if a foreclosure does not satisfy the full amount of the mortgage debt. The bank will have to sue to obtain an irregularity judgment, which can then be enforced by various legal means.
In a foreclosure situation, a homeowner ceases to pay the mortgage payments. The house is collateral on the mortgage loan, so the bank has the right to foreclose on the house. When a bank forecloses on a home, the home may be sold in a foreclosure auction.
In many situations, the amount the bank gets at the auction for the sale of the home is not enough to cover the full amount the homeowner owes it. This is especially true when the bank factors in foreclosure attorney fees and expenses associated with late payments and the sale of the home. As a result, the homeowner whose home has been foreclosed on may still owe money to the bank. Some, but not all, jurisdictions in the United States allow banks to sue the homeowner in a default judgment to recover that money. Some banks don’t allow a deficiency judgment action, because the house was the only security on the secured loan.
When a default judgment is allowed, the bank or other lender must sue the homeowner in court. The bank must prove that the amount owed by the homeowner has not been fully satisfied by the sale of the home at the foreclosure auction. This involves proof of loan statements, sales records, and other related financial documents.
If the bank wins the deficiency judgment, the homeowner will then have a judgment listed on his credit report. This is a separate listing in the public records section of the credit report, in addition to the foreclosure judgment. This rating will remain on the homeowner’s credit report for a ten-year period, negatively impacting their credit score.
The homeowner will usually also be required by the court to pay the money owed to the bank to settle the entire debt. This amount is generally equal to the difference between the amount owed to the bank, including the legal fees for the foreclosure, and the amount of money the bank obtained for the sale of the house. The court will determine the amount of money the homeowner owes in the default judgment based on the evaluation of the bank’s financial records.
If the homeowner is unable to pay the money to satisfy the judgment, the court can impose a lien on any other property they own. The court can also garnish the homeowner’s wages. It involves taking money out of his paycheck each week before the homeowner receives the check.
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