Here is my understanding (hope to have constructive input from everyone.)


Except in non-deficiency states, the potential for a deficiency judgement always exists unless the Lender waives its rights to pursue.


Foreclosure never elimiates the potential for deficiency judgements (except in non-deficiency states). However, the foreclosure process totally eliminates and possibility of negotiating "out" the potential for a deficiency judgement.


Bankruptcy:  the only sure-fire way to end the potential for a deficiency judgement, at any time.


Bankruptcy is the silver bullett that can vanquish a lender seeking a deficiency judgement.  For the homeowner, it is the magic lever.


Deed-In-Lieu does not and must be specifically stated in the agreement.  But the FICO damage is the same as a foreclosure.  Why would someone do this???


So isn't the obvious conclusion that a short sale offers the best possible transaction for eliminating a lender's future claim to a deficiency judgement.  If the deficiency judgement language can't be eliminated or waived, one always has the fall-back to bankruptcy to end the claim forever.


Why pull the Bankruptcy trigger too soon!

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Yes this is the way that I understand it also. Why sellers allow a foreclosure in most cases is because they do not know these facts. It is so important to educate the sellers with their alternatives. I have a short sale seller I am working with right now. This is a hard situation because the father left her and her children have been placed with their real father because she can not afford them. They had a nice house but because of all personal and financial problems a short sale came into play. We have the home priced to sell and it has been shown about four times this week-end. She called me last night late complaining about agents leaving inside the house doors and lights on. She said that if she was going to have to put up with this type of situation that she would just go into foreclosure. She also said that someone told her that she would have to pay the difference from what the bank took for the house and the loan amount. She knew she would be more than likely 1099 but she did not know this. We explained this to her plus she signed something we get the sellers to sign to be sure they know all of their alternatives. Maybe what she needs to do is a bankruptcy? What do you think?
Hi Marsha,

We are in a national situation that has been politicized by the far right. Anyone in trouble is a "blood-sucking leach" and that would include us as Realtors(R).

A short sale is absolutely no different than a traditional sale. The only "wrinkle" is that we need to get the bank to agree to accept less than is owed to release the lien, nothing more, nothing less.

Absent a real run at a short sale, why would anyone be considering bankruptcy (unless they owe another bazillion to others, besides the mortgagee?)

Do the short sale. Get a contract. Submit the proposal to the bank and request that they suspend, postpone, put-on-hold, etc, the trustee sale date "Pending the Review of the Short Sale Proposal."
If that doesn't work, or the @#$%^^Bank wants to pursue a deficiency judgment, then is the time, NOT BEFORE, to file for bankruptcy.

What wows me is that the banks are getting compensated by the Fed and the Treasury for their loan losses. The real losers are us, all of us, on the street, we remain screwed by Hundreds-of-millions of Bank executive agendas and bonuses . . . it's for course "right!" OK to puke now.

The Pharisees of today? Whited Sepulchers?

I think so!


you are correct sir


Discussion Forum

Deficiency vs. Foreclosure vs. Bankruptcy

Started by Clay Kime. Last reply by Joseph C. Alfe Aug 30, 2010. 3 Replies

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