Deficiency Judgments

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Illinois Foreclosure Lawyer

Deficiency Judgments

A deficiency judgment allows a lender to pursue your other assets if you choose to default on your mortgage and the property is foreclosed. In Illinois, a loan servicer has recourse to seek money still owed after the property has been sold at auction.

How Is The Amount Calculated?

The calculation of the Deficiency Judgment amount is fairly straight forward. If you owe $225,000 on your mortgage but your home sells at auction for only $125,000, you may be at risk for a "deficiency judgment" of $100,000. This means that although the homeowner may have thought that the ordeal of debt ended with the sale of the defaulted property, the lender can pursue the collection of the difference between what you owed on the property at the time of default and the amount for which the property was actually sold.

Does Where I Live Matter in Efficiency Judgments?

Yes, and that is why as first step in assessing your risk is to consult the laws for the state where you live (or where your property is located). Specifically, review whether your state is a "recourse state" or a "non-recourse state"? Non-recourse states do not hold borrowers responsible for a home's value if it exceeds the amount the lender was paid at auction. Recourse states, on the other hand, allow lenders to pursue any deficiency, or money you still owed at the time of sale. Monies still owed at the time of the sale is referring to the difference between what the borrower owed at the time when the loan defaulted and what the lender recouped from the auction or sale of the home.

There are several states that have protection laws that prohibit deficiency judgments for most residential mortgages. As of the date this was written, these states include:

  • Alaska
  • Arizona
  • California
  • Minnesota
  • Montana
  • Nevada
  • North Carolina
  • North Dakota
  • Oklahoma
  • Oregon
  • Washington

There are exceptions, however it is unlikely a homeowner will be responsible for a deficiency judgment if live in one of the states listed above. Of course in any given loan, there may be provisions that should be examined by a lawyer to help ensure your interests are protected. However, aside of any unrelated provisions, lenders in non-recourse states must accept any loss if the sale cannot satisfy the loan amount.

Additionally, non-recourse laws in many of these states (California is one of the more notable examples) only apply to what is referred to as the "purchase money" or home loans actually used for the purchase of your home — and nothing else.

Illinois is a Recourse State

Lenders can and often will pursue Illinois borrowers for deficiency judgments after the foreclosure auction occurs. This is why many homeowners consider it prudent to retain a knowledgeable Illinois lawyer if you are facing foreclosure or decide you want to engage in a strategic mortgage default and walk away from your mortgage.

What Is My Next Step?

Contact Illinois Foreclosure Lawyer Daniel S. Khwaja today for a free, no obligation consultation about your situation. Attorney Daniel S. Khwaja is always ready to help.


Illinois Lawyer Daniel S. Khwaja handles cases pertaining to Chapter 7 bankruptcy, foreclosure defense, foreclosure rescue, lender fraud, and renter eviction defense. Schedule Your FREE Initial Consultation.

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Illinois foreclosure attorney Daniel Khwaja wants people facing foreclosure to know they have options. The biggest misconception is that they cannot afford a lawyer; however, Mr. Khwaja offers very affordable rates.

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The information contained in this website is provided for informational purposes only, and should not be construed as legal advice on any subject matter and you should consult with an attorney before using any information from or any Legal Forms provided on this website. All Fees listed are in US Dollars ($) and exclude court filings fees, etc.

Daniel S. Khwaja, Esq. is licensed in Illinois with a main office in Chicago.

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