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What exactly is meant by the term “deficiency judgment”?
When a mortgage is underwater, followed by a resulting foreclosure or short sale, the balance owed over and above the amount which the bank ultimately receives as proceeds from selling the underlying home almost always ends up being a negative number. The “deficiency” between the amount owed and the value of the collateral for the loan is called a “deficiency” because this is the balance for which the property sales price is deficient with regards to satisfying the mortgage loan’s balance. In some states, bank are legally barred from pursuing legal action. They are not allowed to seek financial damages from the borrower in order to enforce payment for a mortgage deficiency. These states are considered “nonrecourse” states. Texas is not a nonrecourse state, so if you are facing foreclosure, or have been foreclosed upon in Dallas County, Tarrant County, Collin County, or any of the other surrounding DFW counties, a lender can hold you liable for the deficiency on the mortgage balance following a foreclosure or short sale.
If they are pursuing you for the deficiency, the lender must go to the court system in order to request and obtain a deficiency judgment. If approved for the deficiency judgment, the lender will have the ability to enforce this judgment in order to secure a bank garnishment, or other financial recourse through placing a lien on any other assets which you could have like a vehicle or other property. This means that even once you have gone through a horrible ordeal of losing a home, watched as the home was sold for no profit to yourself, but ultimately you could end up also losing money in your bank account at a later date, or a lien being placed on a home that you subsequently are able to purchase. Other assets could also be at risk in these situations, resulting in a drain on your money and your sanity.
How can deficiency judgments be avoided?
Under Texas Foreclosure Law, several options exist for homeowners to avoid paying back money through negotiating deals to waive deficiency in return for surrendering the property to the bank. Two options exist for this:
- Filing bankruptcy- in which the borrower foregoes any negotiations with the bank and simply discharges liability through bankruptcy
- Consent foreclosure—in which the borrower turns over the property’s deed and agrees to waive any claims
- Deed in lieu of foreclosure— in which the lender is given the deed in return for avoiding the foreclosure process altogether
Lastly, borrowers can seek to cajole the mortgage company into modifying the loan or adjusting the payments in a suitable way that allows them time to catch up. Approved loan mods may allow homeowners to simply move forward with payments and as long as they do not fall into additional problems with making their mortgage payments, foreclosure lawsuits would be dismissed for good.
Defending You Against a Deficiency Judgment in Dallas, Collin, Tarrant & other DFW surrounding counties
Fortunately, banks do not always seek deficiency judgments against borrowers. Nor do they always get approval for a deficiency judgment against you if you’re in this situation. By hiring a Dallas foreclosure defense lawyer of Richard Weaver Bankruptcy Law firm to help you, you’ll find that we can assist in avoiding these kinds of negative outcomes. It is our goal to help you stay in your home if that is your goal and if that is viable. But if you choose to walk away or have no viable option of staying in your home, we can use the bankruptcy law in your favor to discharge liability from a deficiency judgment on your mortgage.
Looking for a lawyer to stop foreclosure in DFW? Your key to achieving a successful outcome lies in taking action now by calling us to receive a free foreclosure evaluation. We’ll discuss with you regarding your best solutions and start working to develop the best strategy for your unique circumstances. By Pete Maughan.