Can an Equity Company Garnish Wages if You Are Being Foreclosed On?
A company lending you money based on the equity available in your home can be a private firm or a mortgage lender. These new loans exist in addition to your original mortgage and require the same type of monthly payments. If your home enters foreclosure, these lenders may attempt to pursue garnishment orders against your wages as a means of forcing you to repay the debt.
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Repossession of Property
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An equity company or mortgage lender seeking foreclosure on your home doesn't usually need to pursue a garnishment order against you because the company is repossessing your home. In doing so, the lender must seek to sell your home to the highest bidder through a public auction. This allows the lender to recoup the debt owed on the home through your mortgage without forcing you back into court to pursue a judgment for garnishment. The lender can recoup the mortgage debt much faster through a public auction of the property than through monthly garnishment.
Second and Third Mortgages
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If you have a second or third mortgage through an equity company and your original lender forecloses on your home, the company holding your additional mortgages may file a civil suit against you to recoup the debt. A holder of a second or third mortgage is more likely to sue you because the original lender repossess the only collateral available -- your house. If the equity company or other mortgage lender wins the civil suit against you, the lender may choose to garnish your wages as a means of forcing you to repay the debt.
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Deficiency Judgment Garnishments
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A deficiency judgment is a lawsuit from your original mortgage lender when the auction price of your foreclosed home is not sufficient to cover your entire mortgage. The lender or equity company sues you for the difference on the mortgage and can garnish your wages if the court rules in the lender's favor. Deficiency judgments aren't legal in all states. Check your state's laws regarding foreclosure and deficiency judgments so you can prepare yourself in the event the foreclosure sale does not produce enough money to satisfy the balance of your mortgage.
Filing for Bankruptcy
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Filing for bankruptcy can halt a foreclosure proceeding or creditor lawsuit against you until after the court approves or rejects your case. An equity company or lender pursuing a garnishment order against you must also cease all collection activities during this time. If your home is already in foreclosure, bankruptcy cannot halt the process. You can use your foreclosure as leverage to change a second or third mortgage from secured to unsecured debt and have the debt expunged through your bankruptcy. This can eliminate any ability of an equity company or lender holding a second or third mortgage to pursue a garnishment order.
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