Just because you think your foreclosure is in the past, there are still things that can come back to haunt you...make sure you know the rules in your state, deficiency judgments can lead to bankruptcy and decades of problems.
A deficiency is measured by the difference between what you owed on the mortgage (including all court costs and attorneys fees) and the amount recovered by the lender by foreclosing on the property.
Deficiencies can also occur in short sales. A short sale is the voluntary sale of your home for less than what is owed. The lender may release the mortgage, but not release the debt.
The most common consequence of a deficiency is the dreaded 1099 IRS form that strikes at tax time. IRS rules allow the lender to declare that the money still owed on the deficiency is income to you, so you have to pay taxes on it.
Under the Fair Credit Reporting Act, bad debt drops off your credit report at seven years. The same is true for deficiency judgments unless your state allows for a longer period of enforcement, such as Connecticut's 20-year period.
Deficiencies can also occur in short sales. A short sale is the voluntary sale of your home for less than what is owed. The lender may release the mortgage, but not release the debt.
The most common consequence of a deficiency is the dreaded 1099 IRS form that strikes at tax time. IRS rules allow the lender to declare that the money still owed on the deficiency is income to you, so you have to pay taxes on it.
Under the Fair Credit Reporting Act, bad debt drops off your credit report at seven years. The same is true for deficiency judgments unless your state allows for a longer period of enforcement, such as Connecticut's 20-year period.
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