Louisville Sellers in Foreclosure Tell Lenders: If You Demand The Deficiency I’ll File Bankruptcy

Homeowners are hurting. Housing values collapsed. Jobs are evaporating. Bill collectors are calling and suing.

Sellers Try To Help - Banks Demand Deficiency

Homeowners are pursuing short sales which help the bank reduce their losses. In return some banks demand the sellers stay obligated on large deficiencies.

Homeowners Didn't Cause This Crisis and Have Few Options

But, homeowners are pushing back. Just this week a short sale client literally said “if the lender wants the deficiency they can take a number and stand in line.” He also said he’s “that close” to bankruptcy and if the lender pushes him he’ll bankrupt them away. I hear this often and have had clients file bankruptcy rather than live with the overwhelming threat of a massive deficiency judgment.

Most of the time we get the deficiency waived through diligent negotiation. In one case, as soon as the seller notified the lender that they already contacted a bankruptcy attorney the lender backed off a $20,000 deficiency demand, right on the phone, right on the spot. However, when the banks fall back on their "deficiency collection policy" they usually lose more.

Short Sales Save are Beneficial to the Lenders

Many reports have shown that banks lose much more in a foreclosure and bankruptcy than in a short sale.

Homeowners are trying to do the noble thing by cooperating with the lenders. Reciprocity from the lenders would benefit both sides.

***** Important: Sellers Should Consult An Attorney *****

Sellers contemplating bankruptcy should always seek the advice of an attorney and a tax advisor. Realtors cannot give legal or tax advice.