- After the lender forecloses on your home, it may attempt to collect against you for the deficiency balance. If you do not pay the balance, the lender can file a civil lawsuit against you, typically in the county where you live. The court will give you an opportunity to dispute the lawsuit, either in writing or at a hearing. If you cannot successfully contest the lawsuit, the court will enter a judgment in favor of the lender.
- Once the lender has obtained a judgment against you for the deficiency balance, it may apply to the court that issued the judgment for a writ of garnishment. This document allows the lender to order your employer to withhold a portion of your wages to apply to the deficiency. Your employer must respond by verifying that you are employed and must begin sending garnishable wages to the court or the lender.
- Because a mortgage lender is a private creditor, it is bound by limitations on how much of your wages it can take to apply toward your deficiency. Federal law limits private creditor garnishment to 25 percent of your post-tax earnings, and prohibits garnishment if you earn less than 30 times the federal minimum hourly wage per week. State laws may place more stringent restrictions on garnishment than federal law, but may not allow a creditor to take a greater percentage than federal law permits. Four states -- Pennsylvania, South Carolina, North Carolina ant Texas -- prohibit wage garnishment for most creditors.
- Although a lender may pursue judgment and garnishment for a foreclosure deficiency, some states have laws that limit or prohibit this practice. For example, California prohibits deficiency judgments for nonjudicial foreclosures, which take place outside of the court system. This state also prohibits deficiency judgments after judicial foreclosure when the mortgage was for a primary residence and the property was a single-family home or a multi-family property with fewer than four units.
Deficiency Judgment
Writ of Garnishment
Maximum Garnishment
Considerations
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