It’s not wise to just walk away from a foreclosure without taking some sort of affirmative action. Chances are the lender will pursue a deficiency judgment if you abandon the home. It’s better to be proactive than reactive in these types of situation.
In North Carolina banks can’t seek a deficiency judgment if the loan is considered purchase money (see NCGS §45-21.38 and 21.38A). Often this scenario occurs when the Seller does owner financing. It also occur if the lender puts “purchase money” in the Note or Deed of Trust.
Another way to avoid deficiency is to apply for the Home Affordable Foreclosure Alternatives (HAFA) program. If you lender agrees to use this program you will be released from all liability after a short-sale and may have up to $3,000 to move. More information can be found here: http://www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx.
The Statute of Limitations on a brining a suit for deficiency judgment is one year (see NCGS §1-54(6)). Sometimes you can just wait it out.
Of course there is always bankruptcy to consider if the lender does obtain a deficiency judgment. This may be an option if you have a high debt burden already and you want to “unload” debt to in order to get a financial “fresh start.”
Always get an attorney’s professional opinion about the loan itself and see if there are any foreclosure defense claims you can assert or if bankruptcy is a viable option. A suit against the lender is an option of you want to enjoin the foreclosure sale, stay in your home and defend your rights. Often a good foreclosure defense case will result in you staying put for the length of the suit. The lawsuit often brings the lender to the negotiating table where a a modification or release of lien (i.e., no deficiency) can be worked out. It all depends on what kind of outcome you want and what your current situation is. Seek out information and make an informed decision before you take action. You’ll find many more alternatives than you originally thought possible.
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