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You may still owe after foreclosure

The Great Recession caused serious upheaval in the housing market. With scores of Washington, D.C., residents losing their homes to foreclosure, confusion about the process abounded. Now, more Americans are facing lawsuits and other court actions associated with their foreclosure cases, even years after they have vacated their homes.

When most people take out a home loan, they assume their home is a security on the loan; that is, if they default on the loan, the property can simply be used to satisfy the lender. That may not always be the case, however, as many Americans are now discovering. Lenders are increasingly filing new motions in older foreclosure suits in order to recover leftover debt, attorneys' fees and interest that has been compounding over the years. Unsuspecting former homeowners are unexpectedly receiving the bills for these requests, causing financial upheaval throughout the nation.

This process is part of an overall system that permits "deficiency judgment," a popular method for recovering debts since the recession hit. This legal process is permitted in 40 states and Washington, D.C., according to officials. Since 2008, some 400 homeowners in Maryland alone have been pursued through the courts for foreclosure-related debt; this year, 57 new suits were filed before April.

A deficiency balance occurs when a property is purchased for a higher amount than its sale price. Your $500,000 home might sell for just $300,000 after foreclosure, leaving you with $200,000 in outstanding debt. Little information exists about just how many people are able to pay off these deficiency judgments, but a shocking government audit indicates that it could be as low as one-fifth of 1 percent. Deficiency judgments are particularly disturbing because they are used against homeowners who are already admittedly struggling financially.

If you are facing deficiency judgment on your foreclosed property, consider seeking assistance from a qualified bankruptcy attorney and financial planner. These professionals can help you learn more about your legal rights, helping you get back on your financial feet after money woes strike.

Source:  www.washingtonpost.com, "Lenders seek court actions against homeowners years after foreclosure" Kimbriell Kelly, Jun. 15, 2013

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