Your one-stop location for bankruptcy news and information.

What To Do When You are being Foreclosed – Deficiencies

by Eugene S. Melchionne, Connecticut Bankruptcy Lawyer · Posted in *Bankruptcy Information

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.

About Eugene S. Melchionne, Connecticut Bankruptcy Lawyer

Mr. Melchionne is a graduate of The University of Connecticut (BA 1977) and Drake University School of Law (JD 1980) where he received the American Jurisprudence Award for academic excellence. Most recently, Mr. Melchionne was appointed to the Commission on Mortgage Foreclosures by Connecticut Supreme Court Chief Justice Chase Rogers to recommend changes to procedures to protect consumers in the Connecticut Courts in foreclosure cases. Since 1980, Mr. Melchionne has focused his practice in the areas of consumer bankruptcy, workouts and foreclosure defense in distressed real estate markets, real estate transactions, condominium law, commercial litigation, business organizations and probate. Prior to opening his office in 1990, Mr. Melchionne was the Vice President of the Waterbury Credit Bureau and was associated with Grady & Riley in Waterbury, Connecticut and DiPietro, Kantrovitz & Brownstein, P.C. in New Haven, Connecticut. From 1990-1998, Mr. Melchionne was of counsel to Bender & Anderson handling that firm's complex litigation and trials. In addition to his practice, Mr. Melchionne was an adjunct professor at the American Institute of Banking and Teikyo Post University teaching bankruptcy, real estate, commercial and consumer law. Mr. Melchionne also advised the Corporation Counsel's office for the City of Waterbury on bankruptcy and foreclosure matters and mentored junior attorneys in that office. Mr. Melchionne was appointed State Chair for the National Association of Consumer Bankruptcy Attorneys (NACBA). He acts as liaison between the national organization and Connecticut attorneys who are members of the Association.

Previous post:

Next post: