Posts Tagged ‘deficiency judgment’

Question: Looking at short-sale, foreclosure, or bankruptcy… only is Social Security Disability, VA Disability (100%), and disability insurance monthly payment… what should I do? can they come after any of my income in a deficiency judgement? will they even come after me? how will bankruptcy affect me… I currently have NO assets at all except for about 15,000 dollars in savings. thanks Tom from FLORIDA

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.

Question: CAN FILING BANKRUPTCY PROTECT YOU FROM A DEFICIENCY JUDGMENT?

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

Question: What should i do?

Answer: -Well, you can try to settle the debt with them and pay them a fraction (5% -10%) of the original loan amount, you can do nothing and hope they issue you a 1099 in which you will have to pay taxes on that money you received, or they will file a deficiency judgment against you in which they can garnish wages and so forth until that amount is paid.  If it goes that far, most people will file bankruptcy and either get it wiped out completely with a Chapter 7 or agree to pay the lender a certain amount (5% – 10%) over a period of time with a Chapter 13.

Question: We have a home in NY that we were unable to sell and will be going into foreclosure after trying to get the loan modified and bad renters. We currently live in PA and the PA house is paid for…will they come after me for the deficiency, put a tax lien on the PA residence or 1099 us? Thank you for your help.

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.

Question: We don’t know what to do, we have 2 houses in Arizona, 1st house we took out a loan of $60k (leaving us a loan amount of $220k) and used those $60k to build our 2nd home which is now our primary residence we have been living in it for 1yr 4months and we were renting out the 1st house to help us pay the loan, but now we have been unable to get renters in and my husband got fired from work and has been unable to find a job, this month will be our first month not be able to make the mortgage payment, I called the bank and they told me that they were unable to modify our loan since we have 2 houses and 1 is not owner occupied. I spoke to anther department and asked them about a deed in lieu foreclosure, all they told me was that the house would need to be in short sale for 90 days before they could talk to me about that. So my question is if the house sell in short sale or if I give the house back to the bank deed in lieu foreclosure can they come after our primary residence to collect money and if they will can I change the deed of trust to owner primary home (which is free and clear of any loans) before the bank tries to get involved to someone elses name so the bank wont take away our primary residence away? Thank you.

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.

Question: WHAT IS WORSE A DEFICIENCY JUDGMENT OR A 1099 IN THE AMOUNT OF $120,000.00

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.

Question: Hello:

Please help. My father’s home recently foreclosed (last week) and our incompetent bankruptcy lawyer did not know it was important to file the bankruptcy prior to the foreclosure which would have cleared any tax consequences or deficiency judgment against him. Since my father has filed bankruptcy AFTER the foreclosure, I understand the lender will either forgive the debt and issue a 1099 to the IRS or seek a deficiency judgment. My question is, if the lender decides to seek a deficiency judgment, will the deficiency amount be discharged in the bankruptcy – although he filed the bankruptcy after the foreclosure? Please advise. Thanks!

Answer: -More than likely you won’t even have to worry about the deficiency judgment because most lenders don’t file a deficiency judgment against homeowners.  It is much more common for them to issue a 1099.  But yes, if by chance they did file a judgment against him, filing bankruptcy after foreclosure shouldn’t matter.  In fact, most homeowners will file bankruptcy after they are hit with the deficiency judgment so it will be wiped out.

Question: I have a mortgage and home equity line of credit on the same property with Countrywide. I am in Florida. If my property is foreclosed upon what happens to the home equity line of credit? Also am I held liable for taxes up to the foreclosed date?
Thanks

Answer: -If your home has a first and second with the same lender, Countrywide, it’s almost treated like it’s one loan.  If they send it through foreclosure, they’ll probably start at just what’s owed on the first and hopefully get someone to bid on it…If no one bids then they’ll end up with the property.  Then they’ll probably write off that 2nd in which they could file for a deficiency judgment but more than likely they will 1099 you for that amount they lost and you’ll have to pay taxes on it.  As for the property taxes, they’ll have to pay those in order to sell it to an end buyer.

Question: I have an investment property in California that foreclosed, now I have a differdent company NARS calling me regarding that line of credit that I owed the to Chase. They want me to pay the whole 53,000 in full or make payments on it. I currently live in NC. Can they lien my home in NC or garnish my wages?
Thanks,

Answer: -If they file a deficiency judgment against you, yes you’ll have to pay them and that judgment may be able to attach to other properties or yes they could garnish wages if they took it that far.  Very rarely does this ever happen because it costs the banks even more money to sue for a deficiency judgment and clearly they should know you don’t have any money, so they don’t even bother.  And if by some odd reason the bank did file for a deficiency judgment, most homeowner file for bankruptcy which wipes out the judgment altogether.  More than likely they will 1099 you for the amount they lost and write the loan off.

It’s not uncommon either for lenders before foreclosure and after foreclosure to put fear into homeowners minds telling them they will sue them or garnish wages or take assets if they don’t pay.  These are all scare tactics.  It’s there job to “scare” you so you’ll pay them as much as you can, even though clearly you can’t afford any payments to them.

Question: We currently have a loan for $244K and a second home equity line for $79K. Our condo is worth $150K and we owe $320K, but we don’t know wether in California we are liable for that 2nd loan since it’s a home equity line? I don’t want to end up owing Bank of America $79K when I’m going to loose my property and ruin my credit. What should I do? I’m still current with payments but I’m struggling and I can’t do a loan modification I tried.

Answer: –  I would keep trying to work with your bank on the loan modification.  There are several attorney’s out there that “GUARANTEE” there work when modifying loans so you may want to check into that as well.  It’s hard to believe sometimes, but they really do want you to stay, the challenge has always been jumping through all their hoops which an attorney can assist you with.  Also you have a better chance since they know certain things to say that will increase your chances of a successful loan modification.

If a loan modification still doesn’t work, then you could try to do a short sale.  Unfortunately with a short sale you would have to sell your home, but if you can’t make the mortgage, then you’re going to move anyway so might as well be a short sale then foreclosure on your credit.  Regardless if you do a short sale or foreclosure, the bank still has the right to come after you for the deficient amount, but very rarely does this ever happen in California because of the laws there.  And if you have an seasoned agent or investor working with you on the short sale, they can actually eliminate the possibility of a deficiency judgment altogether.  So really all you have to be concerned with is a 1099 from the bank.  They will write off the loan as a loss and 1099 you for the amount they lost.  Whatever you do, don’t ever give up.