Wisconsin residents who have had their homes foreclosed upon may think that their nightmare is over, but deficiency judgments can be brought against people years after their home has been repossessed. If a home is foreclosed upon, the bank may not be able to sell the home for enough money to cover what was owed on the mortgage. This amount, along with interest, is a deficiency balance. Unless an individual files for personal bankruptcy, the balance owed may follow them and even result in garnished wages.
Deficiency judgments are a fairly new occurrence because before the housing market crash that began in 2008, most lenders were able to make up loan balances when they sold a foreclosed property. Today, many individuals are deeply underwater on their homes, and the housing market has still not recovered. The rate of foreclosure in the last few years has been fairly high, and this has led to banks using these judgments as a way to make up for lost profits.
In addition to the extensive length of time that lenders have to file these judgments, as much as 36 years in some cases, the interest rates on these debts are enormous and have been adding up for years. This means that people could end up being hundreds of thousands of dollars in debt, even after they have lost their homes.
One way that people can avoid these onerous judgments is to file for bankruptcy. In addition to preventing a foreclosure from coming back and haunting individuals years later, filing can also eliminate most unsecured debt. A lawyer could help someone throughout the filing process and help them understand the long-term impact of bankruptcy.
Source: Washington Post , “Lenders seek court actions against homeowners years after foreclosure“, Kimbriell Kelly, June 15, 2013