A recent Wall Street Journal article reports that the number of deficiency judgments is on the rise as banks attempt to make as much money as they can after being hit hard with foreclosures.
A deficiency judgment is an order from a judge that authorizes the bank to go after the original homeowner for the difference between what the amount of the loan was and how much the foreclosure sold for at auction. For instance, if the bank gives a loan for $175,000 and the house slips into foreclosure and is sold at auction for $45,000, that means the bank can go after the original homeowner for the $130,000 difference.
For a person who just lost their home to foreclosure, a deficiency judgement notice is devastating. If they had the $130,000 to spare, they probably would have continued making payments. But, luckily, filing for bankruptcy in Modesto can wipe that judgment away.
Like other debts, home-related debt can be tossed out after completing the bankruptcy process in Modesto. Modesto bankruptcy lawyers have helped countless clients who have been put in a bad situation because of foreclosure. Whether it was a job loss, outstanding medical bills or other issues that led to money problems, bankruptcy can get you back on your feet.
The story looks at the case of a man who had a vacation home in Florida. When he lost his job, he lost his house to foreclosure last year. But recently, he got a call telling him he owed $193,000 -- the difference between what the house was sold for and what the original loan was. Because of a huge dip in prices in Florida, his house got only a quarter of what he paid for it at auction.
In California, luckily, there are strict laws about when deficiency judgements can be granted. They can't be granted in nonjudicial foreclosures and they are limited by fair market value of the property. But it can still happen. We have not yet seen banks play by rules in any regard.
Foreclosure defense lawyers are reporting that they are seeing a big spike in deficiency judgments as banks struggle to make up for the money lost to the millions of foreclosures nationwide. A Wall Street Journal report of several hundred deficiency judgments nationwide showed that the average debt was $100,000. It reports that 64 percent of the 4.5 million foreclosures since 2007 were in the 41 states that allow deficiency judgments.
While lenders won't say when they decide to attempt to get a deficiency judgment, it appears they are going after people who considered a strategic default by walking away from a house based on its loss of value rather than inability to pay.
Experts believe banks are more and more panicky with the influx of foreclosures that have taken over the real estate market. They are losing millions of dollars in bad loans. The article reports that investors have been looking at deficiency judgments as a money maker, taking over the judgments and going to bankruptcy court or through debt collectors to make back as much money as they can.
The bottom line is that bankruptcy can save a homeowner who has dealt with foreclosure from getting slammed with a deficiency judgement.
If you or someone you know needs to speak to an experienced and knowledgeable bankruptcy lawyer in Modesto or Stockton, contact the Law Offices of Ben Roberts for a free and confidential appointment. Call today 1-209-522-7500.
More Blog Entries:
Modesto Bankruptcy Filings Remain Steady in Second Quarter: August 24, 2011
Foreclosure Filings Still up in Stockton, Modesto Areas: July 5, 2011
House Is Gone but Debt Lives On, by Jessica Silver-Greenberg, The Wall Street Journal