blog home Bankruptcy & Debt Relief Deficiency Judgments in Los Angeles Foreclosures Can Be Avoided With Bankruptcy

Deficiency Judgments in Los Angeles Foreclosures Can Be Avoided With Bankruptcy

By Encino Bankruptcy Attorney on October 20, 2011

In what has become a disturbing trend‚ banks are increasingly going after homeowners for “deficiency judgments‚” court orders that allow them to collect the difference between what is owed on a foreclosed house and what the bank sold it for at auction‚ The Wall Street Journal reports.

Many Americans have dealt with the stinging feeling of not being able to afford their home and having a bank take it away. That has sent families to live in with relatives or move on to apartment complexes or other housing.

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But what is even worse is if the bank then comes back months or years later with a deficiency judgment‚ which says a judge has signed an order telling the one-time homeowner he or she must pay tens or hundreds of thousands of dollars to make up the difference between the note and the foreclosure price. This can be devastating.

But a way to fight back is considering bankruptcy in Los Angeles. Whether a house has already been through foreclosure and banks are seeking these judgments or if a person is on the cusp of foreclosure‚ bankruptcy can help.

Los Angeles bankruptcy lawyers can help whether you are on the brink of missing a monthly payment or if you are months behind. Filing for bankruptcy immediately protects your home from creditors. The process is designed to work out all debt problems‚ regardless of how big they are.

Creditors can’t take your home once you file for bankruptcy and they aren’t allowed to contact you‚ either. The consumer has built-in protections once they file and one of them is your home.

The article follows the problems dealt with by one man whose vacation home in Florida went through foreclosure after he couldn’t afford it because of unemployment. Then‚ a year later‚ he got a phone call saying that a judge signed off on a deficiency judgment of $193‚000. His house had gotten only a quarter of what was owed and his bank sued him for the rest.

There are 41 states where banks can go after owners in deficiency judgments and all have different rules. Experts believe that banks pick and choose who to go after based on suspicions that they could make payments but don’t because of a drop off in home value. That’s called “strategic default.”

What analysts agree on is that given the economic difficulties of banks saddled with millions of foreclosures‚ lenders will continue this practice. Lawyers say they have seen a steep increase in deficiency judgments in recent years as banks attempt to recoup the money that has evaded them in recent years.

There are more than 3 million properties on the market in the United States and that number doubles when you factor in properties that are either in or close to foreclosure. There are years of inventory and the real estate market is bleak‚ so banks will do what they can to make money.

This means even going after the downtrodden and those who have already lost their homes. Then banks want to take all of their money. But bankruptcy will scare away banks taking this approach. Based on a lack of income or other expenses that preclude paying the judgment‚ bankruptcy can get that debt wiped off a person’s plate forever.

Nader‚ Naraghi & Woodcock‚ APLC will provide a free consultation to help guide you in making a decision that works for you. In Encino‚ Glendale‚ and San Fernando Valley‚ just call (800) 568-0707.

Additional Resources:

House Is Gone but Debt Lives On‚ by Jessica Silver-Greenberg‚ The Wall Street Journal


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