Answer: – We explain what a Deed in Lieu of Foreclosure is in our free reports section. With a deed in lieu foreclosure you are giving the home back to the bank. By giving or deeding it back to the bank, the deed is considered full payment of the mortgage loan, so there cannot be a deficiency judgment. However, there are certain restrictions like all junior lien holders must be satisfied and there must be clear title. Although you’ll be avoiding a deficiency judgment, the bank will 1099 you for the deficient amount. This deficient amount is calculated by taking the difference between the fair market value (FMV) and the outstanding debt. As far as credit issues, a deed in lieu of foreclosure shows up as “Acquisition or Abandonment of Secured Property” and is very similar to an actual foreclosure.

A short sale on the other hand has fewer restrictions but is very similar in avoiding a deficiency judgment. You can ask the bank to satisfy the loan so it’s paid in full. You will be 1099 for the deficient amount. And for your credit, a short sale shows up as a “settled debt” which is very similar, however most credit experts believe a short sale is better on your credit report than a foreclosure or deed in lieu of foreclosure. I would have to agree…but it’s not by much. Any way you go, it’s going to be bad on your credit.

Answer: -A lot of times it just depends on the lender and the amount that’s deficient.

Answer: – Yes, the bank does have the right to go after the homeowner for the deficient amount after the home has been through foreclosure.

Answer: -If your home in South Carolina forecloses and they file a judgment against you, yes they can garnish wages.

Answer: -Well for most people who go through a hardship like foreclosure, the main reason they file bankruptcy is because a judgment was filed against them.  And since they are not in a position to pay off their mortgage amounts, bankruptcy was their only option unless they wanted their wages garnished.  Bankruptcy can protect you from a deficiency judgment if you file before the judgment as well because that mortgage amount would be included in the bankruptcy.  Most people wait to file bankruptcy until after foreclosure because lenders have don’t necessarily have to file a judgment against the homeowner.  They can issue a 1099 which means the mortgage amount they forgave is considered as taxable income.  I would recommend you seek counsel from a professional bankruptcy attoney so you know all your options.  Good Luck

Answer: -Can they come after your assets? No.  Because when you signed the paperwork, the bank agreed to loan you the money and used the house as collateral.  However, if you ultimately go through foreclosure, the bank has the right to file a judgment against you for the amount they lost.  So you are expected to pay the difference or in most cases people will file bankruptcy to eliminate the judgment.  By doing so would require you to sell some or all your assets.  So the best option is to work out a pay off or settlement with the bank for a fraction of what you owe on the loan.  This is called a short sale.  By having the bank approve a short sale and asking them to satisfy the loan, they give up their right to file a judgment.  You’ll also able to avoid foreclosure and possible bankruptcy.  Again the key here is to get them to “satisfy the loan”.  By doing a short sale, you’re also giving the buyer a good deal on a home that is upside down.  Now if you are successful in getting a short sale approved, more than likely they will just 1099 you for the difference.  But that’s a lot better than a judgment.  And there is a chance they won’t 1099 you either.

Answer: -Typically they can’t come after your other assets because the loan was created based on the properties value which was collateral for the loan.  So in the event you didn’t follow through with the terms, they could take the property.  Now with that said, yes they can file a judgment against you which would affect your “assets” because you would have to pay that back or file bankruptcy.  It’s more common that they would 1099 you for the amount they lost but you never know.  They best way to counter a deficiency judgment is to do a short sale and get it accepted as full satisfaction for the loan.  This means they give up their rights to go after the homeowner for a judgment.  All they can do is issue a 1099.  So I would definitely try to do a short sale because it also helps your credit.

Answer: -This is a very common question…can the bank come after my other assets if I do a short sale, deed in lieu foreclosure or it just goes to auction.  The answer is “NO”.  When you signed the paperwork with the bank it specifically states that the home would be sufficient collateral for the loan.  The only way they could come after other assets is if you pledged them as additional collateral in order to get the loan.  So you don’t have anything to worry about.  What you do have to worry about is a deficiency judgment where the lender can sue you for the difference that was not collected.  Although this procedure is not common at all, it does happen once in a while and is more common in mortgage states.  It does not happen very often because homeowners will just file bankruptcy and wipe it out altogether, which means the bank loses even more money.  So more often they will issue the homeowner a 1099 for the amount they lost, which could be a significant amount.  That is why a short sale is a better alternative because it’s less damaging on your credit, you can eliminate the deficiency judgment altogether if done properly, and in many cases you don’t have to pay as much when they 1099 you.

Answer: -Most homeowners would take the 1099 over a deficiency judgment because in most cases you can counter the 1099 with IRS form 982.  Talk to your accountant because you may not have to pay a dime.