Will Assets Be Frozen in a Foreclosure?

A mortgage lender has no power to freeze your assets. However, the lender has the right to seize assets to cover your debts. This is what happens in a foreclosure. Depending on the laws in your area and your particular situation, your lender has several ways to get your assets.

Assets in Foreclosure

If you miss your mortgage payments, your lender may foreclose on your property. In a foreclosure, your lender takes your property, which is an asset, and sells it to pay your debt. This is the only asset your lender can take at this stage. Your other assets are yours and remain liquid, which means that you can convert them into cash if you wish. These assets include other properties, bank accounts and employment income.

Deficiency Judgment

Your lender may be able to seize your other assets after a foreclosure. At the foreclosure sale, your property may not sell for much. In fact, the sale price may not be enough to pay off your entire debt. When this happens, the lender has a deficiency balance, which is the difference between the sale price and your outstanding balance. Depending on your state laws, your lender may obtain a deficiency judgment from the court to seize your other assets.

Types of Assets

Your lender may start by taking assets that it can easily get. The lender can seize up to 25 percent of your wages, stocks, bonds and the assets in your bank accounts. If you own a business, a sheriff or marshal may seize your business assets, such as the money in your register and machinery, on behalf of the lender. The lender may place a lien on property you own that is not your primary residence.

Protected Assets

The law prevents the lender from obtaining some assets. These include the food on your table, the clothes in your wardrobe and the TV in your living room. The lender also can't take vehicles in which you have less than $2,000 equity, or vehicles you use for business. Your lender can't touch 75 percent of your wages, or all your wages if you have a low income. Welfare, Social Security, unemployment, pension and disability checks are also exempt.