Tuesday, July 11, 2017

Eliminating Your Deficiency Judgment Through Bankruptcy

Can bankruptcy help me to eliminate a deficiency judgment after foreclosure?

Losing your home or vehicle to foreclosure or repossession can be devastating, and being stuck with a deficiency judgment makes it all the more difficult.  Anyone who finds themselves unable to make payments on their home or vehicle could face seizure of your property by the bank or loan holder.  If the bank cannot sell your home or car for the amount you owe, you could be liable for the remaining balance, known as a deficiency judgment.  The good news is that you may be able to eliminate your deficiency judgment through Chapter 7 bankruptcy.

Deficiency Judgments Explained

If your mortgage holder forecloses on your home, or your car lender repossesses your vehicle, they will attempt to sell your home or car to the highest bidder.  When the sale does not bring in enough to cover what you owe, the creditor may be able to sue you to obtain a judgment for the deficiency balance.  The right to pursue a deficiency judgment is not automatic; rather, laws on deficiencies are complex and vary by state.  

Deficiency Judgments and Bankruptcy

Lenders that are successful in obtaining a deficiency judgment can enforce the judgment through garnishment of your wages, placing liens on other property you owe, levying your bank accounts, and much more.  Anyone with a deficiency judgment should consider declaring Chapter 7 or Chapter 13 bankruptcy to eliminate the judgment.  

A deficiency judgment will generally be considered an unsecured debt in a Chapter 7 bankruptcy action.  This means that your deficiency judgment could be completely eliminated in your bankruptcy case, just like credit card and medical debt.  If, however, the lender places a lien on any of your properties with the judgment, Chapter 7 will not automatically remove the lien.  Rather, you can pursue elimination of the lien in court.  

Deficiency judgments can be massive debts that most people will be unable to repay easily.  Anyone facing foreclosure and anticipating a deficiency judgment should act now to consult with a bankruptcy attorney to prepare for pursuing a bankruptcy case to eliminate your deficiency judgment and move on from your foreclosure.

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