Deficiency judgments, second mortgage lawsuits, and other post foreclosure problems
1. What happens to my second mortgage in a foreclosure?
Basically, the second mortgage security deed is eliminated, but the second mortgage promissory note remains intact. This means that the holder of the second mortgage can continue to collect on the second mortgage note for up to 30 years based on the original terms of the note. If you have been through a foreclosure recently or are facing one, you should seriously consider filing bankruptcy under either chapter 7 or 13. A foreclosure is a traumatic event. It need not be compounded by a second mortgage note reappearing years from now to take all that you have saved since foreclosure.
2. What is a deficiency judgment?
A deficiency judgment is a judgment for the difference between the amount owed on a mortgage at the time of foreclosure and the amount obtained by the lender at the foreclosure sale for the property. While deficiency judgments on first mortgages are rare in georgia, every lender does have the right to pursue a deficiency judgment.
3. What are the tax consequences of a foreclosure (or short sale)?
The tax consequences of a foreclosure or short sale depend on whether the property is a primary residence and if a deficiency exists after the foreclosure or short sale. If no deficiency exists, then there is no tax consequence. Where a deficiency does exists, homeowners may be taxed on the amount of the deficiency through a 1099 issued by the lender, if the property is not a primary residence. Once the foreclosure or short sale has occurred, bankruptcy laws provide little immediate protection to those facing huge tax liabilities. A bankruptcy filing before the foreclosure or short sale, though, will eliminate all potential tax liability.
4. The time to act is now!!
Whether you are facing foreclosure, just been through foreclosure, or are trying to mitigate your financial difficulties with a short sale or deed-in-lieu of foreclosure, now is the best time to find out what your potential liabilities are and what your options are for avoiding them. Bankruptcy laws provide powerful tools to help property owners deal with the myriad possible consequences related to foreclosures and short sales.
