Does foreclosure result in paycheck garnishing?
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Answer:
The bank would not just be able to garnish his paycheck if the house goes into foreclosure. Since the loan is secured by the house, they will have to auction the house at a sheriff sale. If the property sells for as much as your friend owes on the property, then the defaulted loan will be paid in full.
But when houses do not sell for as much as is owed on the, the bank can pursue a deficiency judgment, in some states. Check your state's foreclosure laws to find out if lenders can sue for a deficiency judgment and how it would work. A deficiency judgment is when the bank gets an extra judgment against the former homeowner to make up the difference between what the house sold for and what was owed on it.
If the bank sues for a deficiency judgment, then they can continue their collection efforts any way they see fit. However, it is extremely rare for banks to sue the former homeowners like this, since they are aware that many people who face foreclosure do not have a lot of extra money that can be used to pay off another judgment. It is not worth the time for the bank to take your friend to court again and try and get more money.
Look up the foreclosure laws for the state in which the property is located and find out if the bank can even pursue a deficiency judgment, though. And then don't worry too much about it, since banks hardly ever go after one.
Good luck.
ForeclosureFish
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Lenders do not garnish wages for properties in foreclosure. They get their money from selling the properties at a Sheriff's Sale. If your friend cannot sell and is willing to walk away, there is an option called Deed In Lieu where the property is signed back over to the lender, forfeiting all equity, debts and responsibilities.
His pay and any bank accounts, I don't think they can take his 401K. I am assuming he owes more than the houses are worth if he owes less they would send him a check when they sell.
Garnishment of wages vary from state to state, however if he made the investments under an incorporated name then no they can only take damages from the corporation. Most likely the properties will be seized and auctioned. He may want to consider filing for bankruptcy to avoid garnishment if it is allowed in Florida & California or some other form of legal remedies...I have studied law and real estate, but let me state that I am not an attorney or a real estate agent and I accept no responsibility for the advice given here...
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