How Does A Deficiency Judgment Impact Illinois Foreclosure?

Are you facing foreclosure in Illinois? The foreclosure process is complicated, and it can have financial consequences that last for years. In addition to issues related to foreclosure, the lender can get a deficiency judgment against you for the outstanding balance when the foreclosure is done. Learn about deficiency judgments in this blog post, and speak to our Illinois foreclosure attorneys today if you need assistance.

Deficiency Judgment Overview

In Illinois, the lender can ask the court to approve a deficiency judgment if they want to pursue you for what you owe after the home forecloses. The outstanding debts are supposed to come from the foreclosure sale proceeds. But if the sale amount does not cover the outstanding debt, you must pay what is left according to the deficiency judgment. Two kinds of deficiency judgments can be ordered in Illinois:

In Personam

This type of deficiency judgment is issued against the borrower. In this situation, you would be personally liable for the debt, which means the lender could garnish your wages, levy your bank account, or even seize your non-exempt assets.

In Rem

This type of deficiency judgment is passed on the property. This means that the borrower redeems the home by paying the balance to the lender with extra interest and fees. In this situation, the lender could put a lien on the home for the remaining debt.

For example, suppose you owe $500,000, and the house sells for $300,000, so the deficiency is $200,000. If the mortgage lender sues you and obtains an in personam or in rem deficiency judgment, you must pay them back. If you do not pay the judgment by shutting your bank account or generally refusing to pay, your lender may send a collection agency after you.

Fortunately, there are options if you are hit with a deficiency judgment. For example, the best choice is to file for bankruptcy when you get an in personam deficiency judgment. Chapter 7 is usually best because all of the debt is wiped out. If you file for Chapter 13, you must repay part of the debt with a repayment plan. Regardless, you should have an experienced attorney advising you.

It is hard to say if a lender will come after you for the deficiency amount. The lender may want to avoid lawsuit expenses and forgive some or all of your debt. But if the lender mails you a Form 1099-C, you must include the debt forgiven as income on your next tax return.

How Do You Find Out The Deficiency Type In Your Case?

The deficiency judgment will come at the foreclosure sale confirmation after the foreclosure sale. This occurs when the foreclosure is over. You should review the order confirming the sale to determine which type of judgment was ordered. The document should have a paragraph that describes the judgment type and how much the deficiency is.

Contact Our Illinois Foreclosure Attorneys Today

If you face foreclosure and have legal questions, you do not have to face your situation alone. An experienced attorney can help you get the answers you need. Contact our Illinois foreclosure attorneys at Covert Marrero Covert LLP for help at (630) 717-2783.