How to Negotiate Bank Forfeiture of Deficiency Judgment After Foreclosure

Deficiency judgments happen in foreclosure when the bank sells your house at auction but receives less money than is owed on the mortgage. Laws in most states give banks the right to file a lawsuit against you for the balance, and a bank is unlikely to forfeit its right to collect a deficiency judgment because it is virtually guaranteed to win in court if the foreclosure and auction were conducted in the proper manner. A deficiency judgment is a legal decision bearing a judge's signature, requiring you to pay a specific amount to the bank.

Instructions

1

Read the judgment to find the name of an attorney or other contact for the bank. If you do not have the judgment, obtain a copy at your county courthouse and request assistance from a clerk.

2

Call the bank officer or attorney to request a payment plan for the full amount. The judgment puts you in a difficult position because it allows the bank to seek garnishment of your bank account or wages if you fail to work something out. With the bank holding all the power, the best you can hope for is a payment plan. The bank has the right to demand a lump sum payment and move to garnishment if you refuse to pay. That means a payment plan could actually be considered a victory.

3

Negotiate affordable payments. If you offer to make payments for the full amount, the bank will see you are sincere about resolving the issue. Take advantage of that and suggest a payment plan that starts low while you are still recovering from the foreclosure. Example: A judge has ordered you to pay the bank $10,000. Offer to pay $100 a month for the first two years, with the payments gradually increasing after that until the $10,000 is paid in a total of five years. The bank officer can do the math for you. Also, you can offer to pay $100 a month for five years, then a balloon payment for the remaining balance. Note that agreeing to a balloon payment can create more problems if you do not have the money when the note is due.

4

Get the agreement in writing with assurances the bank will not attempt to garnish your wages or bank account as long as you make payments as agreed.