Can a Collection Agency Take Money Out of Your Check for a Home Foreclosure?

When you go through the foreclosure process, your personal assets are at risk. If the lender decides to pursue a case against you at the end of foreclosure proceedings, a garnishment order can be signed against you. However, because court cases are expensive, many lenders do not pursue this type of judgment.

Significance

When your house goes through the foreclosure process, it is typically sold to the highest bidder to settle the debt owed on the property. However, at the end of the foreclosure process, the lender may still be owed a significant amount of money if the sale price of the home was less than the amount you owed on the mortgage. In this case, the lender sometimes can take you to court to obtain a deficiency judgment for the difference owed on the house. While foreclosure proceedings are ongoing, a deficiency judgment cannot be ordered and your wages cannot be garnished by a collection agency.

Time Frame

A deficiency judgment permits a collection agency to attempt to access money by freezing bank accounts or garnishing wages. Court judgments are typically valid for up to 20 years, and your wages can be garnished until the debt is settled. The lender must go through the court to obtain a notice for wage garnishment, which is presented to your employer before your employer is required to take funds from your paycheck.

Considerations

In some cases, the lender is not eligible to pursue a deficiency judgment against you. For instance, in some states, if you attempted a short sale prior to foreclosure, the lender may not be able to collect any additional money owed after foreclosure proceedings have ended. Familiarize yourself with your state's laws regarding your rights for wage garnishment.

Types

Certain funds cannot be garnished to settle a mortgage debt. Exempted funds include Social Security benefits, unemployment benefits, veterans pay and disability payments. Also, a cap is placed on the amount the collection agency can garnish. According to the United States Department of Labor, no more than 25 percent of your disposable income can be garnished from a paycheck.