After Foreclosure: Arlington Heights Deficiency Judgment

The effects of the economic recession are still being felt throughout the nation, even though foreclosure rates have dropped significantly. Unfortunately, some homeowners who are underwater in their mortgages are facing foreclosure. And once the foreclosure action is over, the owner may still be held liable for the balance of the loan that is not covered by the proceeds of the sale.

Deficiency Judgment Explained

In a foreclosure or short sale, sometimes a homeowner owes the lender more money for the property than what is received from the proceeds when the home is sold or auctioned. When this happens, there is a remaining loan balance still owed by the borrower. This balance is called a “deficiency.” Numerous states throughout the nation, called non-recourse states, do not provide legal remedies for the lender against a buyer who has a deficiency. Illinois, however, is not one of these states. Consequently, a borrower in Arlington Heights, Schaumburg, Palatine or elsewhere in Chicago is liable to the lender for the remaining loan balance on a property after a short sale or foreclosure occurs. The legal action the lender may take against a borrower in this circumstance is called a deficiency judgment.

The lender will have to obtain a court-ordered deficiency judgment against a borrower who owes a balance post foreclosure or short sale in order to collect the funds. A judgment is a court decision on the rights and claims of parties to a lawsuit. If the court approves the request, the lender can use the judgment to place a lien on bank accounts or other assets the borrower owns or even garnish wages earned.  

How to Avoid a Deficiency Judgment

Illinois foreclosure law provides several options for a borrower who is facing a foreclosure. A lender may or may not seek a deficiency judgment against a borrower. Nevertheless some available options for homeowners who are underwater include:

1.         Deed in lieu of foreclosure – borrower gives lender the deed to the property in exchange for not filing a foreclosure action.

2.         Consent foreclosure – borrower gives lender the deed free and clear of all claims.

3.         Loan modification – consists of a restructuring of the mortgage, approved by the lender, allowing the borrower to remain in the home and have lower monthly payments.

4.         Redemption – borrower must pay all money owed on the loan, including late fees and charges, becoming up to date on the mortgage (can only occur up to 90 days after a foreclosure summons).

Contact a Foreclosure Attorney

If you are facing foreclosure or short sale of your home and believe you may owe a balance on your loan once the sale has occurred, contact an Illinois foreclosure attorney today to learn about your rights and obligations. Don’t navigate this complex process alone. With over 35 years of experience fighting for clients’ rights, the Law Offices of Gilbert C. Schumm can provide real estate advice, and serves the Chicago area including Arlington Heights, Rolling Meadows, Des Plaines, and Streamwood.