A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.
When can a lender obtain a deficiency judgment against the borrower?
§ 580(d) limits a lender’s right to seek a deficiency against the borrower after the property is foreclosed by a trustee’s sale regardless of the type of loan or the type of property being foreclosed if the sale did not generate enough proceeds to pay the full amount of the debt.
Which states allow deficiency judgments?
The following states have anti-deficiency laws: Alaska, Arizona, California, Connecticut, Hawaii Iowa, Minnesota, Montana, Nevada, New Mexico, North Carolina, North Dakota, Oregon, Washington, and Wisconsin.
A deficiency judgment is a court ruling placing a lien on a debtor for further funds when the sale of secured items falls short of the full debt owed. Depending on your state, it may be that during a foreclosure deficiency judgments are prohibited.
When do you have a deficiency in a foreclosure?
If you are facing foreclosure, or have lost your home through foreclosure, you might still owe your mortgage lender money after the sale. This happens if the foreclosure sale price is less than the amount remaining on your mortgage – it’s called a “deficiency.”.
Can a deficiency be forgiven after a short sale?
In most states, you are on the hook for a deficiency after a short sale. But there are ways you can avoid or handle a deficiency. And for foreclosures, short sales, and deeds in lieu of foreclosure, you might owe the IRS some money if the lender forgives the deficiency
How much debt can be forgiven from a foreclosure?
Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
When to apply for debt relief from foreclosure?
Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. This provision applies to debt forgiven in calendar years 2007 through 2017.
