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Deficiency Judgement in New Jersey? Has anyone been hit with one after walking?

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by AloneInTheWilderness, Jan 10, 2012.

  1. AloneInTheWilderness

    AloneInTheWilderness LoanSafe Member

    We will be discharging our mortgage via CH7 along with credit card debt, etc... Our home is underwater by about $20K, but it has been consistently losing value since we purchased in 2008. We plan to let it go into foreclosure and stay as long as we can in order to save money. Once the home goes up for Sheriff's sale we'll find a place to rent, save some more money, and hopefully reenter the real estate market in 3-4 years with a substantial down payment. We have been advised by two different attorneys that this is a prudent decision based on our circumstances, but one did mention to me that there is a slight possibility that the bank (or PMI company-we had to do PMI because we only put down 8%) would come after us for a deficiency judgement. I've read a little about them on here and other places, and they seem exceedingly rare, but scary nonetheless. Being on the hook for a deficiency (this would be post BK so no chance of getting out of it that way) of tens of thousands of dollars would blow our whole plan to hell. Am I worrying about nothing? Does this really never happen in the NJ courts? I should add that our mortgage is not held by one of the big banks-it's a small local bank-not sure if that makes a difference.
  2. Jim007

    Jim007 LoanSafe Member

    I would think if your mortgage was discharged in BK Chp7 .. there would be no way they could come after you for deficiency.. Ever !
  3. AloneInTheWilderness

    AloneInTheWilderness LoanSafe Member

    I think that's true if you are foreclosed upon prior to discharge, but not after? We will file in July after my wife has lost her job. Once we're discharged we will not reaffirm and plan to stop paying. At that point we'll simply wait until the property goes to Sheriff's sale (which could take two years from what I've been hearing) and save our money. Since the deficiency judgement would hypothetically come long after the CH7 discharge (it won't be until after the sale), how could the discharge protect us at that point?
  4. Jim007

    Jim007 LoanSafe Member

    I'm not sure... but maybe someone else with more knowledge than me will chime in... Like maybe my man Cat.... Once you discharge your mortgage in BK Chp7 and do not reaffirm its gone kaput.. .. you owe nothing ..doesn't matter when its discharged ..prior to forclosure or post...
    Good luck down the road with everything... I as well live in NJ... its been 23 months of no payments here .. still waiting for NOD..
  5. AloneInTheWilderness

    AloneInTheWilderness LoanSafe Member

    Wow-who is the bank? If you don't want to name it can you just say whether it's a small community bank or a Wells Fargo/BoA type outfit? I'm going to guess big bank since they haven't even sent NOD? I would imagine that our bank will send us NOD after 90 days but after that the courts will tie it up-we hope...
  6. sailordude

    sailordude LoanSafe Member

    I don't understand why your attorney says you may be liable for a deficiency judgement. I'm guessing there has to be a miscommunication somewhere.

    If you don't reaffirm your mortgage (and why would you?) in chapter 7, then your mortgage debt is WIPED OUT with all your other debt. You won't owe a thing, regardless of when it goes into foreclosure.

    Of course, this doesn't mean you get a free house or anything. The mortgage is still secured by the house. Keep paying to keep staying. Once you stop paying, the house will eventually go into foreclosure. However, you will have no personal responsibility for the debt, so you should be free from any potential deficiency judgements, tax liabilities and harassing phone calls, I would think. Or most anything else.

    Actually, a weird side effect of going bankrupt and not reaffirming...more than likely the bank will be happy to keep taking your mortgage payments; but your good payment history will no longer show up on your credit report as it is no longer a personal debt. That means if you changed your mind and decided to keep paying the mortgage until payed off, none of that good payment history would benefit you credit wise. In your case, this doesn't sound like an issue. If you DO reaffirm, your payment history should remain on your credit report; but once you default you will be putting yourself at risk. I don't recommend it.

    As to your Michigan property also being underwater, if there is any good news to this whole mess it is that there is no incentive for the trustee to try and take your property away since it has no equity.

    Add the "I am not a lawyer" boilerplate down here. Your money back if the above is incorrect. I'm pretty sure it's right, though.
  7. sailordude

    sailordude LoanSafe Member

    Oh, crap. I got your story mixed up with another. Sorry. Forget about all the Michigan nonsense. I've been doing too much reading. The bankruptcy part should be right, though.
  8. AloneInTheWilderness

    AloneInTheWilderness LoanSafe Member

    Thanks-it's nice to get confirmation from several sources that this is the case. It looks like CH7 will really allow us to start over thank God.
  9. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Sailordude is right on here, if your mortgage is discharged through bankruptcy you cannot be held liable for any judgements after the foreclosure is finalized..
  10. dwdmguy

    dwdmguy LoanSafe Member

    I'm sorry for what you are going through. I too am in NJ. (Central). I have filed chapter 7 and just had my creditors 341 meeting. I'm sorry to say that NJ is a recourse state and in fact can tort you post filing legal fees and if they really wanted to deficiency as well albeit as others have pointed out this is rare.

    Good luck
  11. Baron Walker

    Baron Walker LoanSafe Member

    I'm in Nevada, when you say that mortgages will be discharged thru BK7 and I cannot be held liable after foreclosure, does this include if we had a second mortgage?
  12. TomEason

    TomEason LoanSafe Guide Staff Member

    Baron Walker

    Welcome to Loansafe.

    If your 2nd mortgage was discharged in your BK case, you're no longer liable for the paying that debt, but the lien remains on your property.

    The lender can, and likely will, FC if the 2nd is "in-the-money."

    I recommend you consult with your BK lawyer.

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