Foreclosure… the End of the Line?

All too many homeowners know personally the horrors of the foreclosure process. During the recent economic downturn, record numbers of foreclosures were filed. What many foreclosed homeowners do not know is that they may soon hear from the very banks that foreclosed on them months or years ago.

The process is called a deficiency judgment, and through it the bank is entitled to get a judgment against foreclosed homeowners for the underwater amount of the mortgage. Thus, if the home was worth $300,000 and the bank could only sell it for $200,000, the bank can get a judgment against the foreclosed homeowner for the $100,000 difference.

Many mortgage lenders are targeting people who they think are “strategic defaulters,” or those who could afford their mortgage but chose not to pay it, for deficiency judgments. They are trying the process to recoup some of their losses on mortgages over the past few years.

For many foreclosed homeowners, the world is just beginning to right itself. Many are just getting their feet back under them. These judgments can be devastating for a person who has just gotten himself to a place where he thought he was debt free. Worse still, mortgage lenders have a total of 56 years in New Jersey to collect deficiency judgments. That means the debt will follow many borrowers into retirement, when they can least afford to pay.

If this is happening to you, the good news is that in most cases these judgments can be discharged – leaving you free from obligation – in a Chapter 7 bankruptcy. There are, however, income limits and other regulations for filing a Chapter 7.

To read more about deficiency judgments, click here.

If you would like to discuss deficiency judgments and your options, including Chapter 7 bankruptcy, please contact the office at 732-752-8834 or by using the contact form on this website. Your first consultation is free.