Will I Owe Anything After Foreclosure in Louisiana?
If your lender recently seized your Louisiana home for nonpayment, foreclosure may not be the end of the story. Your home's value and your mortgage loan's outstanding balance determine whether or not you will still owe your lender money after foreclosure. Although not all lenders pursue borrowers for the remaining debt they owe after foreclosure, some do.
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Facts
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After seizing your home, the mortgage lender sells the property. The sale occurs either via auction or through a standard real estate listing. Your lender adds its foreclosure costs to the amount you owe on your loan, then deducts the sale price of the home from that amount. If the money your lender recovers from the sale exceeds your loan balance and its expenses, you do not owe any additional funds. If the loan balance and fees exceed the money recovered, a mortgage deficiency exists.
Significance
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Louisiana is a recourse state. This means that individuals living in Louisiana are subject to legal action from lenders attempting to recover mortgage deficiencies. Your lender will notify you of the deficiency and offer you the opportunity to make payment arrangements. If you do not respond or are incapable of making arrangements to pay off the debt, your mortgage lender has the legal right to file a lawsuit against you.
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Limitations
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The Louisiana Deficiency Judgment Act limits the amount that you can be sued by a mortgage lender following a foreclosure. The lender must first attempt to sell the property for 2/3 of its appraised value through a court foreclosure auction. If it does not sell the property for 2/3 of the appraised amount, it will publicly advertise the property and can sell it for any amount. Should this occur, your lender must give you credit for a minimum of half of the property's appraised value---limiting the deficiency balance you owe.
Effects
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After winning a lawsuit against you, the mortgage lender can garnish up to 25 percent of each paycheck you receive after federal and 401k deductions. Your mortgage lender also reserves the right to seek garnishment of another sort by seizing your bank accounts. Louisiana allows creditors to add their court costs to the total amount a debtor owes. Thus, your deficiency will grow should your mortgage lender sue you.
Time Frame
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After winning its lawsuit against you, your mortgage lender has 10 years to enforce its court judgment before the judgment becomes obsolete. It does have the legal option to renew the judgment for another 10-year enforcement period. One notable exception to standard enforcement procedure exists in Louisiana, though. If the lender files a lawsuit against you, wins, yet does not take any action to recovery the deficiency within three years, its court judgment loses its validity.
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