Going through any foreclosure can be a traumatic experience. Families may lose their homes or the physical location of their business. Sadly, this may not be the end of their legal and financial troubles. If the loss of real estate has been the product of a judicial foreclosure, the lender may move to collect the remainder of the debt that you owed on the land. This could occur if the sale of foreclosed property did not bring enough money to cover the remaining amount on your mortgage. These deficiency judgements can cause headaches for former property owners.
An Oakland deficiency judgement lawyer may be able to help you. They can explain how these judgements function and why a lender may be pushing for their creation in civil court. Our dedicated foreclosure attorneys are prepared to fight back against the creation of these orders and strategize ways to limit their impact on your future.
What is a Deficiency Judgement?
Deficiency judgements are legal orders that may go into effect after a foreclosure makes its way through the court. When banks and other lenders foreclose on a property and take possession, they will immediately move to resell the property on the open market. The idea here is to gain funds to cover the deficiency left on the borrower’s mortgage.
However, situations can arise where the foreclosure sale does not bring sufficient funds to cover the amount left on the old mortgage. When this occurs, the lender can ask a court to create a deficiency judgement. This judgement obligates the original borrower on the mortgage to pay the difference.
There are limits as to when a lender can ask a court to create these judgements. For example, California Code of Civil Procedure § 580d states that a deficiency judgement can only result from a judicial foreclosure. This is a foreclosure that has moved through the courts. An Oakland deficiency judgement attorney could provide more information about the purpose of these judgements and when they may come into being.
Providing Defenses Against the Creation of Deficiency Judgements
The best way to avoid the creation of a deficiency judgement is to erase the need for a lender to seek this remedy. One option that still involves the surrender of property is to enter into a deed in lieu of foreclosure agreement. In simple terms, the bank agrees to take back possession of the property for less than the value remaining on the mortgage note. This eliminates the need for a deficiency judgement as there is no longer any difference between a sale price and debt. A similar option is to create a short sale when the property moves directly to a new buyer.
If a lender has already foreclosed on a home, it may be possible to argue that a deficiency judgement is impossible under state law. One option is to argue under California’s one-action rule that the lender has already taken their opportunity to collect on the debt. According to CA Code Civ. Proc. § 726(a), lenders cannot seek a deficiency judgement after a foreclosure if they have already pursued a non-judicial foreclosure or attempted to collect on a promissory note.
Let an Oakland Deficiency Judgement Attorney Protect Your Financial Future
The foreclosure on your real estate may seem to be the end of your financial problems. However, if a subsequent sale of the property fails to bring funds sufficient to cover your debts, the lender may ask a court to create a deficiency judgement. This could leave you responsible for the remaining payments.
An Oakland deficiency judgement lawyer could help contest the creation or legality of these orders. They could argue that the law does not allow their creation due to the type of loan or that the kind of property itself is exempt from these collection efforts. Contact us today so we can get started on your case.