Dealing with Deficiency Judgment in Foreclosure during a Divorce
The debt will most likely be considered as a marital debt if the house is a marital asset. A deficiency judgment is a marital debt if it develops from the short sale of a marital residence before going to a divorce. Only one party will going to own the house as soon as the divorce papers is signed and approved. However, when the house was under a short sale or foreclosure, the person who will be responsible to pay off the deficiency judgment will be the one who has the title to the home.
Deficiency judgment is refers to the difference between the amount that the house was sold for and what you owe the bank. What happens next is that the bank will do nothing on your remaining debt. However, five years later, they will go to court and obtain a judgment to your remaining debt. After they have a judgment, they have 20 years to collect on the judgment. You can’t run from any of these since they have both your social security numbers from the days when you were married and owned the house with your spouse. Therefore, collecting on the judgment would be easy for them. If you are unable to pay your debts on time, they can garnish your wages and confiscate some of your personal property to fill in your debts. As long as you were on the title and deed to the property at the time it went foreclosure and the judgment of divorce does not clear you from the responsibility for the debt. To prevent this dilemma from happening, you should negotiate with your lender at the time of the short sale.
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