Can Foreclosure Place a Lien on Other Property Owned?
- A deficiency judgment occurs if the lender sues the homeowner for the difference between the sale price of the foreclosed home and the balance still owed on the loan. Most states allow deficiency judgments if the home was foreclosed judicially. If a power of sale clause is used outside the court to foreclose, a deficiency judgment is not allowed. State laws vary regarding the limits and criteria for a lender to seek a judgment. The amount of time a lender has to pursue the judgment also varies. For example, in California, lenders are limited to 30 days after the redemption period expires. In Florida, a lender has up to five years to obtain a judgment against the homeowner.
- If the court grants a deficiency judgment against you, the lender can use any legal means necessary to collect the funds you owe. The creditor may be able to garnish your wages, levy your bank accounts and place liens on any property you own. In some states, it does not matter if the home is your primary residence, a lien may still be placed on the home. Lenders usually place liens on your other homes as a last resort. As long as there is a lien on the home, you will not be able to sell or refinance the home without first satisfying the debt.
- You can avoid a judgment by acting before the home is foreclosed. Lenders are often willing to work with homeowners to reach a solution that prevents foreclosure. If you cannot afford your home, a short sale may allow you to avoid foreclosure and risk of a deficiency judgment. A deed in lieu of foreclosure is another method that lets you voluntarily give up ownership of the home and the liability.
- If a deficiency judgment is filed against you, your options are limited. With a deficiency judgment, it is not difficult to prove your debts exceed your assets. Chapter 7 bankruptcy requires assets to be liquidated to pay the debt. If you own another home, you may need to surrender the property if you choose to file bankruptcy. Chapter 13 may allow you to repay only a portion of the deficiency judgment. Consider contacting an attorney to discuss your legal rights when facing a judgment.