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The Role of Deficiency Judgments in Foreclosures

Bankruptcy Attorney

The foreclosure process in Illinois or any state, can be a long and tiring endeavor. As a borrower, you may have to deal with financial difficulties – even after it is over and done with. Lenders can also put a deficiency judgment against you to acquire outstanding funds of the loan after the foreclosure.

What are Deficiency Judgments?

Lenders seek deficiency judgment when the owed debt is higher than the sale price of a foreclosed property, which will not cover the amount of debt you owe. The court may tell you to make this payment if the lender appeals to one.

According to the Illinois Code of Civil Procedure, lenders have to file a lawsuit in court to foreclose on a home. In Illinois, lenders can bring two types of deficiency judgments against defaulting borrowers – an in personam judgment i.e. against the borrower and in rem judgment, which is against the property.

In Personam Deficiency Judgment

This is the deficiency judgment the borrower should be really concerned about because if successful, it allows lenders to collect the outstanding amount from them personally. In other words, it gives them the legal right to garnish their salaries and access their bank accounts. In fact, even if the borrower passes away, the lender can collect against their estate.

You can prevent this from happening as a borrower by filing for Chapter 7 bankruptcy. If you file for Chapter 13, you may have to pay part of the debt only.

In Rem Deficiency Judgment

This deficiency judgment usually doesn’t affect the borrower personally. If a lender asks for an in rem judgment, it is seen as part of the foreclosure process, in case the borrower exercises his/her right of redemption.

If you redeem the property after a foreclosure sale, the judgment will allow the lender to put a lien on it to cover the outstanding balance after the payment of the redemption amount. Depending on the court procedure, the foreclosure process can take 215 days in case it is uncontested.

Plus, in Illinois, there can be no deficiency judgment if the lender accepts a Deed in lieu of foreclosure. In this process, the defaulted borrower must transfer the title of the mortgaged property to the lender directly and completely avoid the foreclosure process.

How Covert Marrero Covert LLP Can Help

Receiving a foreclosure notice may feel horrifying, but not if you know the options you have at your disposal. At Covert Marrero Covert, LLP we offer both legal and moral support during this difficult time and provide solutions that can help you get back on your feet faster. The first thing you need to do is act quickly once you receive the notice. This includes working out a mortgage payment schedule with your lender or even filing for bankruptcy – if necessary. Get in touch with us at our law offices in Naperville, Warrenville or Schaumburg, Illinois, for a consultation today.

By Brian Covert | Posted | Posted in Bankruptcy Attorney

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