Chicago Deficiency Judgments

What is a deficiency judgment?

When an underwater mortgage results in a short sale or a foreclosure, the amount of money that the bank finally receives from the sale proceeds will nearly always be less than the amount that the borrower still owes on the mortgage. The remainder of the loan balance is referred to as the "deficiency," because it is the amount by which the sale proceeds were deficient in paying off the loan balance. In many states throughout the country, the bank cannot pursue legal action against the borrower to enforce payment of the deficiency - these are referred to as "nonrecourse" states. Illinois is not one of them. In Chicago or Cook County or anywhere else throughout the state, a mortgage lender has a legal right to hold the borrower liable to pay on the remaining loan balance after either a short sale or a foreclosure.

In order to obtain payment from you, the bank will go to court to request a deficiency judgment. If the request is approved, the bank will then be able to use the judgment to secure a wage garnishment or perhaps a lien against your bank account or any other assets you might have such as an automobile. Not only would you have lost your home and seen the property sold at zero profit to you, but you could also lose your car or other assets and see your income drained by a wage garnishment.

How can you avoid a deficiency judgment?

Under Illinois Mortgage Foreclosure Law, there are several options available to homeowners in the area. The homeowner can potentially avoid paying back the extra money by creating a deal that waives deficiency in exchange for returning the property back to the lender. This can happen in one of two ways:

  1. Consent foreclosure—gives the lender the property deed free from all claims from the borrower
  2. Deed in lieu of foreclosure—gives the lender the deed to the house in exchange for not having to pursue a complicated foreclosure

It is also possible to help prevent the foreclosure in the first place by reinstating or redeeming your mortgage. In order to reinstate their mortgage, the homeowner has to pay back all missed mortgage payments, all late fees, and other charges all at one time. This is only applicable for 90 days after the original foreclosure summons. For mortgage redemption, the homeowner has 90 days after the foreclosure judgment and sale is entered to pay back their loan balance in its entirety, as well as any fees.

Lastly, individuals may wish to seek a modification of their loan or to restructure their mortgage payments. An approved loan modification can allow for homeowners to continue making mortgage payments without falling into further debt and will dismiss any foreclosure lawsuits.

Defending You Against a Deficiency Judgment in Cook County

Fortunately, it is not inevitable that the bank will seek or even obtain a deficiency judgment against you. When you hire a Chicago foreclosure defense lawyer from Whiteman Borden, LLC to represent you, we can work to help you avoid such a negative outcome to the case. Our goal is to make it possible for you to walk away from this situation free from any future liability to pay on the home loan.

Looking for an attorney for foreclosure in Chicago? The key to success is to take action now by contacting us for a free case evaluation to discuss your options and begin working on a strategy for you.