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How Can I Avoid a Deficiency Judgment During the Foreclosure Process?

Posted on in Foreclosure

Libertyville IL foreclosure defense attorneyWhen a family experiences financial difficulties, they may be unable to make mortgage payments, which may cause their lender to begin the process of foreclosure. While the possibility of losing a home can be hard enough for a family, in some cases, they may be required to make additional payments even after the foreclosure process is completed. If the sale of a home during foreclosure does not fully cover the amount owed on the mortgage, a lender may pursue a deficiency judgment against the borrower and attempt to collect the remaining amount. However, borrowers have a number of options that can help them avoid a deficiency judgment and additional financial obligations.

Options for Avoiding Deficiency Judgments

The best way to eliminate the possibility of a deficiency judgment is to stop the foreclosure process altogether. There are a variety of foreclosure defense strategies available, including negotiating mortgage loan modifications that will allow a borrower to become current on their mortgage and continue making payments. However, if foreclosure cannot be avoided, borrowers may have other options for avoiding further liability, including:

  • Consent foreclosure - A borrower may make an agreement with their mortgage lender in which they will not contest the foreclosure of the home, and the lender will waive their rights to a deficiency judgment once the foreclosure process is complete.

  • Deed in lieu of foreclosure - A borrower may agree to turn over the title to their property to their mortgage lender, allowing the lender to take possession of the home without going through a judicial foreclosure. If a lender accepts a deed in lieu of foreclosure, this will relieve the borrower from liability for any additional amount owed, unless the parties specifically agree otherwise.

  • Short sale - A homeowner may take steps to sell their property for less than the full amount they owe on their mortgage. In these cases, borrowers will usually need to receive approval from their mortgage lender, and they may be able to negotiate an agreement in which any deficiency will be forgiven.

  • Bankruptcy - If a borrower is unable to negotiate an agreement with their mortgage lender, and the lender initiates a lawsuit attempting to collect the deficiency, the borrower may be able to eliminate their requirement to pay these debts by filing for bankruptcy. A Chapter 7 bankruptcy will allow this and other debts to be discharged after the debtor’s non-exempt assets are liquidated. If a person does not qualify for Chapter 7, they may be able to pursue a Chapter 13 bankruptcy, in which their outstanding debts will be consolidated into a repayment plan that will last between three and five years. Once this plan is completed, they will receive a discharge of their remaining debts.

Contact Our North Chicago Foreclosure Defense Attorneys

If you are facing foreclosure, the attorneys of Newland & Newland, LLP can help you understand your options. We will look at what you can do to avoid the loss of your home, or if this will not be possible, we will help you negotiate agreements that will help you avoid further debts or financial losses. Contact our Waukegan foreclosure lawyers at 847-549-0000 to arrange a complimentary consultation.

 

Sources:

https://www.investopedia.com/terms/d/deficiency-judgment.asp

https://www.thebalance.com/deficiency-judgments-315547

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=073500050HArt%2E+XV&ActID=2017&ChapterID=56&SeqStart=107200000&SeqEnd=115900000

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