Deficiency Judgement Illinois Short Sales and Foreclosures
What is a deficiency Judgement in Illinois?
In Illinois, a deficiency Judgment is a money judgment awarded to a lienholder who has taken a loss based on the difference of a foreclosure sale price and the debt owed typically from a mortgage. A deficiency judgment will only apply when the lienholder has taken a loss.
Illinois is a recourse state and a judicial foreclosure state.
All foreclosure processes have to go through the court system. Illinois being a recourse state means a lienholder who has taken a loss has a right to take legal action against a debtor to collect what is owed.
The Nightmare of a Deficiency Judgement
If a lienholder is awarded a deficiency judgment from the courts following a judicial foreclosure, they can pursue this debt for many years. Some methods of collecting debt could include wage garnishment, levying accounts, liens against other existing property. Often to protect from this, a homeowner may have to entertain a bankruptcy. Depending on what type of bankruptcy you qualify for will determine if you still owe a debt, extending the process for years.
If you can complete a short sale, get waiver liability for the remaining balance, you could be in a position to buy a home as early as 2 to 3 years, depending on some factors such as loan type, personal circumstance, etc. A judicial foreclosure with a deficiency judgment could extend this time frame out for years.
Deficiency Judgment in a Short Sale
Completing a short sale in Illinois does not automatically mean a mortgagor is free from the liability of a deficiency judgment. However, the short sale does allow you to negotiate a waiver of the liability of the partial or whole amount. Along with other factors, this opportunity makes a short sale a very desirable option for many property owners. A short sale is your first line of defense in avoiding the many harmful outcomes that a judicial foreclosure will result in.
Controlling the Price and Loss
Short sales give you, the homeowner, the ability to control the loss the bank takes. This is one reason banks will entertain both accepting a short sale and agreeing to waive the liability for the remainder of the amount owed. When a bank takes over property through a judicial foreclosure, there are a lot of costs incurred, potential damage due to the length of holding the property and the vacancy. This is especially a concern in areas like Illinois, where homes vacant in the winter are vulnerable to pipe bursts and water damage. The very nature of the property being listed on the open market as foreclosure and the stigma will likely have an effect on the final sales price, creating a much larger deficiency. Being proactive by pursuing a short sale will increase the likelihood of reducing and possibly erasing your liabilities. A short sale will be a much more forgiving outcome and an earlier recovery time for you with the proper assistance.