NJ Foreclosure – What is a Deficiency Judgement?

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Millions of Americans today are swimming in an unbelievable amount of debt. Many of them have taken appropriate steps to resolve their debt in the hope of staying afloat without an albatross weighing them down.

One effective debt resolution strategy is to file for NJ bankruptcy, which either wipes clean (Chapter 7) or reorganizes (Chapter 13) all monies owed. While filing for bankruptcy does affect one’s credit score, after 7-10 years, neither a Chapter 7 or a Chapter 13 will appear on a credit report. This gives the debtor a shot at a financial “do over,” so to speak.

Many people who file for bankruptcy also allow their home to be sold via foreclosure. Once again, while not ideal for your credit score, a foreclosure allows significantly distressed homeowners a way to rebuild their finances.

In a foreclosure, the homeowner essentially gives their home to the bank or lender in exchange for not making any further payments on the mortgage. Since the bank then has full possession of the defaulted property, they can sell it at a foreclosure auction, during which the home is auctioned off to the highest bidder.

Because foreclosure auctions involve cash payments, the house usually sells for a lot less than was owed on the mortgage. In the past, it was typical for lenders to “write off” the discrepancy between the sale amount and the amount that was still owed. Most banks felt it was bad business to chase down former homeowners who were already in dire straits, so they settled for the amount they received from the foreclosure sale and that was the end of the story.

Due to the recent housing crisis, lenders have been losing more and more money (exceeding $1 trillion), and some of them have decided to take action against borrowers who had their loans foreclosed upon.

To do so, lenders can go to court and receive a judgment for the amount of the deficiency between the sale price and amount owed on the mortgage. This judgment is called a Deficiency Judgment.

More lenders are beginning to pursue Deficiency Judgments in order to collect on money they’ve lost through foreclosures, which means that many people who have just begun to get a solid foot-hold financially will essentially be slapped in the face. Making it all the way through bankruptcy court, giving your home up to foreclosure sale, only to then discover that you still owe tens of thousands of dollars can be utterly devastating.

Many years may have passed since you’ve even given a single thought to your former home when you discover that your wages will be garnished or that your checking account has been frozen until you pay off the Deficiency Judgement.

Fortunately, there is recourse. Although it may feel like your foreclosure was a thing of the past, a Deficiency Judgement is not something that can be ignored.  You need a NJ foreclosure defense attorney on your side. Veitengruber Law is here to help you defend yourself against lenders you thought were completely in your past. Call now. (732) 852-7295.

Image credit: Dustin Gaffke

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4 Responses to NJ Foreclosure – What is a Deficiency Judgement?

  1. Pingback: My Bank Won’t Accept a Deed in Lieu of Foreclosure | Veitengruber Law

  2. Pingback: Will My Foreclosure Hurt My Spouse’s Credit After We Marry? | Veitengruber Law

  3. Pingback: Bankruptcy After Sheriff’s Sale – Will it Save my Home? | Veitengruber Law

  4. Pingback: What is the Best Foreclosure Alternative? | Veitengruber Law

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