Foreclose or short sale deficiency

[whizzif]

If you foreclose -- or short sale and there is a deficiency -- what can the bank come after as far as assets? Checking account or car, wage garnishment or is this only if you file bk? If I don't file bankruptcy -- can I just "ride it out?" - I'm renting now and like where I live.
Thoughts?
What happens if you don't file and just have a judgement against you?

[HHM]

If you short sale, there is no deficiency because the bank MUST agree to accept the short sale. Read this thread...

http://www.bkforum.com/showthread.php?t=17098

What you will have is forgiven debt and will receive a 1099-C, the amount of the forgiven debt will be treated as INCOME for tax purposes. You might qualify to get out of paying income tax on that forgiven debt if you qualify as insolvent (see IRS form 982).

If they get a deficiency judgment against you, then they can levy against any non-exempt assets.

[whizzif]

how would they get the money I have in the bank now? It's a different bank -- and in a different state?

Even with a judgement, what is the process for seizing the savings account at a different bank? There's not much in there but it's all I have.

[erinmi]

Actually HHM you are wrong, there is a deficiency when you short sell. Whether or not the bank chooses to come after you for it, depends on the bank.

We short sold our home in May 2007 and yes, HSBC agreed to the sale. However, they then began to pursue us for the deficiency of $40,000- they refused to write it off. It was the main reason we filed for CH 7 bankruptcy.

[All Cash]

Hello all,

THERE IS WAY TOO MUCH CONFUSION REGARDING DEFICIENCIES .

My name is Kevin Kim and I'm the author of Seattle Short Sale Blog.

The bank CAN pursue you for the deficiency, but an excellent negotiator can WAIVE the lender's right to do so. In the event that the lender does not, most deficiency balances can be negotiated down FURTHER, YES, EVEN AFTER THE SHORT SALE.

AFTER homeowners close their short sale, many end up filing for BK because of their deficiencies. However, what if you could negotiate the deficiency AFTER THE SHORT SALE and significantly reduce your payments, where you are paying LESS than you would in a BK Repayment Plan? Not to mention NOT HAVING A BK on your credit report!

Feel free to explore this very popular post on deficiencies.

http://seattleshortsaleblog.com/2009/06/12/short-sale-promissory-notes-foreclosure-deficiency-judgements-how-much-will-you-owe-your-bank-after-a-short-sale-vs-a-foreclosure/

Also, click this link if you are dealing with a post short sale deficiency and you are considering a BK. THERE MAY BE A BETTER SOLUTION FOR YOU.

http://seattleshortsaleblog.com/deficiency-judgement-debt/

I wish you all the best,

Kevin Kim

You need to be banned for this shameless self promotion.

[DGranny]

This post is specifically for ALL CASH!! YOU are the one that needs to be banned from this site for your SHAMELESS and obvious HATRED of the President of this great nation that allows someone like you to display such a despicable image such as you have disrespecting and denigrating the President and his Office.

I didn't think this was that kind of site. There are sites that welcome your kind, but as long as I'm on this site, I'll call you on your Hatred and Disrespect. You also disrespect Mr. Kim.

Kevin, you gave very valuable information to Whizzif and others, I'm sure, and I thank you for that. You are not the only person who has provided links that may be of help to those of us who come here for information that may help us in our particular situations. I was able to file Chapter 7 pro se because of a link I got from this site that led me to the Nolo book that helped me so very much.

And, finally, to the Moderators and Administrators of this site, I trust you will pay closer attention to the people you allow on this site, what you allow them to say and HOW they depict themselves. Just take a look at ALL CASH'S image!! It's offensive to me and should be to others who visit this site. GRANNY

[hereforinfo]

Actually HHM you are wrong, there is a deficiency when you short sell. Whether or not the bank chooses to come after you for it, depends on the bank.

We short sold our home in May 2007 and yes, HSBC agreed to the sale. However, they then began to pursue us for the deficiency of $40,000- they refused to write it off. It was the main reason we filed for CH 7 bankruptcy.

Most people negotiate during the short sale process to have the bank forgive the deficiency balance. It's different in every case, just depends on the agreement you make with the lender. Sometimes the seller signs a promissory note for some of the deficiency and the rest is forgiven or sometimes it's all forgiven. That's the benefit of a short sale. Otherwise why bother with the hassle? Did you not address this with the lender before you sold?

The downside is that you may be taxed on the forgiven amount, but if it's your primary residence some or all of it may be exempt. (Only the amount used to purchase or significantly improve the property is exempt - if you took cash out or a heloc and spent the money on debt consolidation or elsewhere, that part is taxable).