What Happens To A Mortgage Deficiency After Foreclosure?

Our firm consults with several financially strapped clients each week confronted with the potential consequences of a foreclosed property. The decline in home prices has left homes significantly undervalued. Many of our clients have been faced with the difficulty of dealing with a home they can't afford due to loss of income and can't sell due to loss in market value. The question becomes "what happens when a foreclosed property is sold for an amount less than the mortgage?"

Any amount still owed on a home after it has been sold by a bank after foreclosure is called a "mortgage deficiency" and subject to being treated like any other debt. This is particularly scary to some debtors because some homes are sold for amounts significantly under the value of the mortgage, leaving a large debt to account for. Not all banks pursue these deficiency claims. However, it is impossible to know if a mortgage deficiency will turn into a default judgment because not all lenders treat their loans the same. In fact, recent trends show that lenders are becoming more aggressive in their attempts to recoup some of their investment.

The procedure required by lenders to pursue a deficiency judgment are contained within O.C.G.A. §44-16-161. According to the statute, if the mortgage company wants to recover the difference, it must file a notice of the sale of the property within 30 days after the foreclosure sale. The lender must also show that the property was sold at its true fair market value and that the lender properly advertised the foreclosure sale. At that point the judge can either confirm the foreclosure and allow the mortgage company to pursue the deficiency balance, deny the confirmation and the right to pursue a deficiency judgment, or order a resale of the property.

Depending on your financial circumstances a chapter 7 or chapter 13 bankruptcy could eliminate your mortgage deficiency along with other debt obligations. If you are in danger of having your home foreclosed or have a mortgage deficiency due to a previous foreclosure call, Douglas County Bankruptcy Lawyers today for a free consultation.