In the State of Delaware, when properties are sold at foreclosure sales for less than the borrowers’ loan amounts, lenders are allowed to pursue deficiency judgments. This means if your lender obtains a judgment, you could end up owing your lender the difference between the sale proceeds of your home and your mortgage balance. The lender must prove to the court that the property value on the sale date was less than your mortgage balance. If the property value is more, then the lender cannot obtain a deficiency judgment. Even if your lender is entitled to obtain a judgment, does not mean they are going to file one against you.
You should be aware of Delaware deficiency judgment laws if your property is about to go to foreclosure or has already been sold at a public foreclosure auction sale. It is a good idea to speak with a Delaware foreclosure defense attorney to give you advice regarding Delaware foreclosure laws and deficiency judgments.
Options to Avoid Deficiency Judgments
Deficiency judgments in Delaware can be avoided if you work out a solution with your lender such as:
- Reinstatement. Your loan is reinstated after you pay all past-due amounts including any fees and costs.
- Refinancing. You pay off your old mortgage with a new lower interest rate and fixed term mortgage to make your payments more affordable.
- Forbearance. Your lender agrees to let you catch up on past-due payments by entering into a short term agreement. Once you are caught up, you continue paying your regular monthly mortgage payments.
- Mortgage modification. Your lender modifies your existing loan by lowering your interest rate and extending your loan term to make your monthly mortgage payments more affordable.
- Selling your home. You sell your home and use the proceeds to pay off your mortgage.
- Short Sale. Your lender agrees to allow you to sell your home for less than your loan balance and agrees to accept the sale proceeds as satisfaction of your debt.
- Deed in lieu of foreclosure. You sign a deed transferring title back to your lender, and walk away owing nothing.
- Bankruptcy. Only used when there are no other options. Your lender cannot file a deficiency judgment against you when you file bankruptcy.
Lenders prefer to negotiate a solution with you. They don’t really want to spend their time and money pursuing deficiency judgments in Delaware against their former customers. Also, they know that most people facing foreclosure are facing financial hardship and don’t have assets to go after to collect on the judgment.
Obtain an Attorney
Delaware deficiency judgment laws can be confusing to most borrowers. It’s a good idea to speak with a Delaware foreclosure defense attorney to find out about your rights. The attorney can negotiate a settlement with your lender if you are facing foreclosure or if your lender has filed a deficiency judgment against you.
