What To Do When You are being Foreclosed - Deficiencies
By Eugene S. Melchionne, Connecticut Bankruptcy Attorney on Aug 14, 2007 in Connecticut, General Bankruptcy Information, State Specific Bankruptcy Issues
Just because your house has been foreclosed, does not mean that you are free from the mortgage debt or other obligations of the home. You can be held liable for the difference between the market value of the house and the balance of the loan.
When a Court enters a foreclosure judgment in Connecticut, a determination must be made on the value of the property. If your home is worth more than all of the liens on it, it will be auctioned. But if the home is worth less, the Court will order a “Strict Foreclosure”. In such a case, the Judge will set a deadline (the “Law Day”) for you to pay the loan in full. If you do not pay in full, your ownership in the property will be cancelled. However, your liability does not end there.
If the value of the property is lower than the total debt, the mortgage company can ask the Court for a “Deficiency Judgment” for balance of the loan. This judgment is good for twenty years and can be renewed. So years later, when you thought that you were free of the bill, you can find this debt springing to life and your pay or assets seized.
During the course of the foreclosure, it is important to monitor the action even if you are giving the property up so as to make sure that there will be no “deficiency”. If there is a deficiency, the only escape may be a timely Chapter 7 Bankruptcy Case.
Continue to Part Three, So You Want to Save Your Home, but also check out Bankruptcy Discharge of Deficiency Judgments.
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