Wage Garnishment & Foreclosure
Depending on the value of your home and the remainder due on your mortgage loan, a foreclosure could leave you with a mortgage deficiency. If your lender legally pursues the mortgage deficiency, you may find yourself subject to a wage garnishment.
Other People Are Reading
-
Significance
-
Lenders attempt to sell foreclosed homes at auction. If your home sells for less than you owe, this leaves you owing a deficiency to the bank. The bank then has the right to sue you for the deficiency (See Reference 1).
Effects
-
If your mortgage lender sues you for a deficiency and wins, it can request a wage garnishment order from the court. Through wage garnishment, the court can order your employer to withhold money from your paycheck to pay off the mortgage deficiency (See Reference 2).
-
Limitations
-
The U.S. Department of Labor stipulates that a creditor may only seize 25 percent of your weekly disposable income (See Reference 3).
Time Frame
-
The garnishment will continue unless you pay off the deficiency you owe or return to court and successfully convince a judge to overturn the original judgment permitting the garnishment.
Considerations
-
If you switch employers, the mortgage lender must discover where you are employed. It must then return to court and request a separate wage garnishment order for your new employer (See Reference 4).
Benefits
-
Some states, such as California, have non-recourse laws that prohibit mortgage lenders from suing you for your mortgage deficiency following a foreclosure (See Reference 5).
-
References
Resources
- Photo Credit new home for sale image by itsallgood from Fotolia.com
