If you’re a homeowner who is having financial problems, the specter of losing your home to foreclosure may sound like the worst of all possibilities – until you learn about deficiency judgments.
When a lender reclaims a property through foreclosure, they will usually sell that home at a public auction or sheriff’s sale in order to try to recoup their losses. If your home doesn’t sell for enough money to cover the mortgage you hold, Connecticut permits your lender to seek a deficiency judgment for the difference between the home’s sale price and what you still owe on your loan.
For example, imagine that you have a mortgage for $350,000. After you end up in a financial situation that leaves you unable to pay the monthly note, the bank forecloses. At a sheriff’s sale, the house sells for the bargain price of $275,000. That leaves the bank with a deficiency of $75,000 – which they would like to reclaim. The deficiency judgment allows the lender to pursue you for the remaining debt, using whatever legal means they have available. That can include all the usual debt-collection practices, including trying to attach your wages, adding liens to any other assets you have and more.
You may be able to maneuver your way out of the problem
Sometimes it’s possible to negotiate with a lender and secure an agreement that they won’t seek a deficiency judgment in exchange for making the process of reclaiming the property a bit easier. For example, your lender may agree not to pursue the deficiency if you agree to surrender the deed in lieu of foreclosure (rather than making the lender go through the much lengthier, more expensive process of an actual foreclosure). It may also be possible to eliminate a deficiency judgment through bankruptcy.
If you are facing foreclosure or a potential deficiency judgment, it is advisable to seek legal advice from an attorney who can provide guidance based on your specific circumstances. The Law Office of Russell Gary Small, P.C. helps people struggling with financial issues find practical solutions to their problems. Call 203-694-6655 today to learn what we can do to help you.