When your home is foreclosed on, you may face an additional deficiency judgment as a result. This is a sum of money you may need to pay that results from a shortfall when the bank sells your property. If you are struggling to pay for the deficiency judgment, you may wonder if bankruptcy is an option.
Deficiency Judgments
Whether or not a deficiency judgment will affect you is based on the state you live in and the terms of your loan. Some states do not allow lenders to pursue a mortgage deficiency at all. Also, if you have several mortgages on your house, this can lead to a deficiency judgment. A deficiency judgment is a challenge since you may have your wages garnished. You may also have a lien placed against your assets to satisfy the judgment.
Deficiency judgments are uncommon, and those who undergo a foreclosure assume that the debt will be wiped out afterward. As a result, debtors often find the deficiency judgment to be a complete shock. If you are struggling with a deficiency judgment, you'll need to seek the help of bankruptcy attorney services.
Chapter 7 and Chapter 13 Bankruptcy
Filing for bankruptcy allows you to avoid a deficiency judgment. After bankruptcy, any debt remaining after a foreclosure is discharged under chapter 7. The deficiency judgment is treated like any other unsecured debt for the purpose of chapter 7 and chapter 13 bankruptcy.
Chapter 13 bankruptcy is a wage earner's bankruptcy. It is intended for those who are struggling to pay off their debts and acts as a payment plan. Chapter 13 is ideal if you also carry tax debts because it can allow you to stop paying interest on tax debts.
If you attempt to discharge your debts through chapter 7 bankruptcy, this will only protect you from unsecured debt. Your creditors will no longer be able to pursue you for these debts. However, it will not protect you from any liens placed on your property. For this, you must file a motion to have the lien removed. If the lien does not allow you to protect the equity that you're entitled to under state exemption laws, you may have them removed.
Bankruptcy Attorney Services
Because of how bankruptcy can impact your deficiency judgment, it's critical that you speak with a bankruptcy attorney service. An attorney will provide you with advice and will also represent you in court.
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