Being Sued in Foreclosure – Who Can Do It? When? So that?

Unfortunately, one of the most common consequences for homeowners facing financial hardship is a lawsuit in one form or another. This may be from the mortgage company foreclosing on the house, or from another creditor or collection agency trying to leach the crisis from a productive member of society facing a temporary setback.

Lawyers, even though most of them are not happy with their work, spread their own desperation by targeting homeowners and courting creditors to try to collect judgments from people who need help, not lawsuits. The two lawsuits that most concern victims of foreclosure are those that result in deficiency judgments or liens against their home by a creditor that can lead to foreclosure.

deficiency judgments

Being sued for a deficiency judgment after foreclosure seems to be one of the biggest concerns for homeowners in danger of losing their homes. Not only are they thousands of dollars behind on their mortgage payment and facing a public auction of their home, but the ordeal may continue even longer. If they are sued for a deficiency judgment for the amount the bank does not recover from the sale, they may have to pay tens of thousands of dollars in the future for their single financial hardship that led to foreclosure. Fortunately, this is often not a danger for the vast majority of homeowners, as mortgage companies will not generally pursue a deficiency judgment.

However, not all states allow mortgage companies to sue homeowners after the foreclosure process is over, so homeowners should check state foreclosure laws before worrying about the possibility. If the state in which the first property is located allows deficiency judgments, then the bank could theoretically sue after the sheriff’s sale of the house. However, they cannot simply automatically encumber any other home or property, or garnish wages; the lender would have to take the homeowners back to court, hire local attorneys to file the lawsuit paperwork, get the judgment out of court, and try to have it enforced in the county where the homeowners have moved after moving out of the repossessed house

So, after the bank has already lost a lot of money on the foreclosure property sale, it will spend even more money and resources on pursuing another judgment against homeowners who were unable to pay the mortgage or the first judgment. The first lawsuit, for foreclosure, was a waste of time, as they were simply left with a property that may be worth much less than what they had borrowed, and many homeowners are facing foreclosure due to financial difficulties that seriously alter their income. This is, of course, the reason they fell behind on their mortgage payments in the first place.

In fact, since foreclosure victims no longer own that home, the court may not even know where to serve them with the lawsuit paperwork. If they don’t have an address, they can’t be served very well, which means the trial will be shaky at best. Homeowners may discover that they were improperly served and vacate the deficiency judgment, costing the lender even more money in legal fees to try to prove that services were performed. The mortgage company will have to continue spending resources to pursue a judgment that it may never be able to collect.

Furthermore, there is little reason to expect that people, right after foreclosure, will have tens of thousands of dollars to pay a judgment. The former owners know they don’t have the money. The bank knows they don’t have it. It will cost them more money to sue and try to collect than the banks will be able to get from homeowners. That’s why banks don’t even bother suing for deficiency judgments after foreclosure, in almost every case.

Unsecured Creditor Bonds

However, other creditors may try to sue homeowners for a lien on property. In this case, they can try to obtain payment of the debt through a judicial sale of the house, thus leading it to foreclosure. However, even in this case, many homeowners can use other options to avoid losing the house or having to continue paying the judgment, even if the house doesn’t sell for enough at auction to pay it off in full.

In this case of being sued for some other debt besides a delinquent mortgage note, the same principles apply as in the deficiency judgment. The creditor may try to take homeowners to court to get a judgment and then have the judgment enforced as a lien on their home. However, will they try to force foreclosure, even if they get the judgment and a lien is placed on the house?

They probably won’t go this route, because they most likely won’t get anything from the sheriff’s sale if there’s a mortgage (defaulted or not) on the house. The mortgage would be paid off first, and usually there is nothing left afterward to pay the other liens. Many sheriff’s sale properties don’t even sell for enough to pay off the first mortgage in full, and liens on the unsecured debt may be in line to be paid after back property taxes, a first mortgage , a second mortgage, and a home equity line of credit. , most of which will not be paid in full or at all.

This is not to say that homeowners shouldn’t try to resolve the debt before it becomes a lien on the home. They may try to work with the creditor to avoid the lawsuit and set up a forbearance for a few months while they recover from their financial difficulties, or work out a plan to pay off the debt once they have enough income. If all else fails, many homeowners in foreclosure or facing financial collapse are clearly insolvent right now (owe more than their assets are worth), so a Chapter 7 bankruptcy could be used to eliminate unsecured debt (such as what they owe the creditor discussed in this section) and allow them to keep their home.

It seems that the very rich in society, like the Googles and Microsofts of the world, and those facing financial difficulties are the most common targets of lawsuits to collect money. The rich are targeted because they can pay millions of dollars just to get rid of the lawsuit and the bad press and they won’t be affected. The poor or financially unstable are targeted because the stresses of their current situation combine with their own ignorance of the court system to make them extremely easy targets for wretched company-seeking attorneys and collection agencies that feed on the bottom. Knowing the dangers of being sued before or after foreclosure, as well as what options can be used to defend yourself, is essential for homeowners to avoid being taken advantage of by creditors for decades after they recover from financial difficulties.