Even after you lose your home in a foreclosure, the lender can still come after you demanding that you pay any remaining portion of the outstanding loan balance. If the lender obtains a deficiency judgment from the court, the lender can request your employer to garnish your assets.
Court Judgment
After a foreclosure sale, the lender takes the sale proceeds to pay off your outstanding debt. However, the sale price may not cover your entire loan. Your property value may have fallen from the time you purchased it or the buyer could have bought it below market price. Depending on your state laws and other factors, your lender may go to court to get a deficiency judgment against you. Once your lender has a deficiency judgment, it can demand that you pay the difference between the sale price and your outstanding debt.
Garnishment
After getting a deficiency judgment, your lender may be able to request for garnishment. This gives the lender access to your money so the lender can get the amount you still owe. The two types of garnishment are periodic and nonperiodic. With a periodic garnishment, your lender can get your wages and other incomes periodically. With a nonperiodic garnishment, the lender can take money from your bank account or other assets once.
Payment and Objection
You can let the lender get your assets to pay off your loan if you can afford it. Depending on your particular case and your state laws, you may be able to raise objection to the garnishment with the court. For example, you can object if your assets are legally exempt from garnishment or if you have already paid the deficiency judgment.
Bankruptcy
To protect your assets from your lender's claim and relieve yourself from debt, you can file for bankruptcy. The two most common types of bankruptcy are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy erases your debt and stops the lender from getting more money from you. However, the court may sell some of your assets to pay the lender. With a Chapter 13 bankruptcy, the court prepares a repayment plan for you to follow for the next three to five years.
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