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Deficiency Judgments And Short Sales: Bankruptcy May Be The Answer

Deficiency Judgments And Short Sales: Bankruptcy May Be The Answer

: Richard West Law Office

The entire USA is seeing record foreclosure numbers and this has a devastating effect on local economies and impacts many industries. Every part of the real estate and housing industries are affected. In some cases a short sale is arranged to prevent foreclosure, but the end result is the same in that you no longer have this huge financial rock weighing you down.

In the USA thousands of former homeowners who arranged a short sale to avoid foreclosure are now being reminded that their financial troubles are far from over. Consumers who arranged for a short sale months or even years ago are starting to receive notices of additional amounts owed, and this is causing new financial difficulties at a time when the consumer believed that these problems were in the past. In some cases the contact happens after your home has been foreclosed on and auctioned off. You receive a notice showing that your home sold for an unbelievably low amount at auction and you owe the remaining balance, which is often tens of thousands if not hundreds of thousands of dollars. This scenario is also becoming more common after short sales which were done with bank approval.

A deficiency judgment may be issued for any balance between what the home sells for and the balance on the home mortgage loan. One woman who resides in Virginia received permission from the bank for a short sale of her home when her income decreased significantly. Months after the sale had taken place this woman received a notice for $65,000 in a deficiency judgment for the home. The short sale left this amount still owing on the loan balance, and the woman ended up filing for bankruptcy protection.

If the bank approves a short sale then the homeowner typically believes that any unpaid balance will be erased and no more payments will be due on the mortgage. In many cases this is true but many financial institutions are managing to come back after the borrower months after the home has been sold. You may not even realize that there is a default judgment until many months after you have sold the home. Some banks will actually wait or delay with the hopes that you can get your financial footing back and then try to recover on a deficiency judgment.

A short sale is one of the most common reasons that a deficiency judgment is issued. Short sales occur for many reasons, and the homeowner who has seen their home value drop below the amount owed may consider this method just as well as someone facing foreclosure or who bought more home than they can afford with subprime loans.

Your lender may or may not pursue a deficiency judgment, and there are some factors that may play a role in this decision by banks. The rate of foreclosures in the state you live in can play a part, and so can any other liens that are present against the home such as a second mortgage or even a credit line. If the lender does pursue a deficiency judgment you could end up with your credit ruined and the threat of garnishment hanging over you.

Some lenders will tell you that once the short sale is complete your debt will not be pursued but few if any banks will put this fact in writing. There is no guarantee that you will not be served with a deficiency judgment next month or even next year. The only way to ensure that your short sale or foreclosure will not result in a deficiency judgment is to coordinate this action through a bankruptcy case. If you give up all interest in the home in bankruptcy then you are assured that you will have no future liability even if the sale of the home brings in much less than the mortgage payoff.

You do not have to short sell the home you own regardless of what your lender may say. A short sale will hurt your credit no matter what your payment history has been like, and may not benefit you or eliminate any of the excessive debt that you have in the home. The lender benefits from a short sale because there are no expensive foreclosure costs, and you could still be on the hook for the balance of the mortgage after the home has been sold. A bankruptcy attorney can help you get the best possible results if you are going to surrender your home and ensure that you do not face financial difficulties and a deficiency judgment later on.

If you are one of the many people facing a delinquency judgment, foreclosure, long term unemployment, or you are underemployed and facing economic hardship because of this, there is help and solutions available. A qualified bankruptcy attorney can help you turn your finances around, and get a fresh start when you need it most. The bankruptcy attorneys at Richard West Law can help provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances. Visit https://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.