If you have lost your home in a foreclosure, you may be shocked to learn that you still owe a debt to your mortgage lender! Although the real estate market is slowly recovering, most homeowners in New Jersey have borrowed more than what their home is worth. Thus, when your home is sold at a sheriff’s sale, a significant deficiency balance is typically left remaining. The lender(s) that is owed the deficiency balance can file a lawsuit against you to recover this amount.
By way of example, if you owe $250,000 on your first mortgage and it is sold at the foreclosure sale for only $200,000, your deficiency balance is $50,000. Additionally, if you have a second or third mortgage on your home, you will also owe the balances due on those mortgages.
In New Jersey, a lender cannot seek to recover the deficiency balance in the foreclosure action. Instead, the lender is required to file a seperate lawsuit within three months from the date of the foreclosure sale (or the date the sale was confirmed). Second or third mortgage holders may have a year or more to sue for a deficiency balance.
A homeowner has the right to dispute the deficiency balance. This requires you to file an answer in the lawsuit filed by the lender(s) seeking to collect the deficiency. Your answer should submit evidence regarding your home’s fair market value. If you are successful, the court will lower the amount of the deficiency balance accordingly. It is important to note, however, that you lose the right of redemption if you contest the amount of the deficiency.
Filing a personal bankruptcy can also be an effective means for eliminating the deficiency balance that you owe. As soon as you file your Chapter 7 or Chapter 13 case, the automatic stay prevents the mortgage lender from pursuing the lawsuit to recover the deficiency. Additionally, bankruptcy allows you to avoid the tax consequences that often result when a borrower has had debt forgiven.
If you need help dealing with your foreclosure deficiency balance, contact us today to schedule an initial consultation.
We are debt relief lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..