Here's a pearl of wisdom I picked up at a CDPE class I took today.
In some short sale negotiations, it's sometimes not possible to get the bank to waive their right to pursue you for a deficiency. This freaks many people out because they have to live in fear of the bank coming after them again. Some bankruptcy attorneys market to this fear and get people to take the bankruptcy route in order to put a final end to it all.
Before you take the bankruptcy route, make sure you know how that will affect all aspects of your life. A bankruptcy could affect future job offers and do major damage to your financial future. Do you want to take such an extreme measure when you're not even sure that a deficiency judgement will ever be pursued?
Here's an alternative plan to deal with this situation. First find out what the statute of limitations are for your state. It varies from as little as 3 years to as many as 15 years. In Georgia, the statute of limitations as far as I can tell is six years. I'm not a lawyer so you might want to double check.
Some envision that banks might sell off these deficiency judgements to collection agencies at some time in the future for pennies on the dollar and let them try to collect what they can. So what happens if this occurs to you? Do you think that a collection agency would maybe take a whole lot less than the total amount of the deficiency? If they paid pennies on the dollar, there's a good chance that they would settle for 10 cents on the dollar and be done with it. A $100,000 might be able to be settled for $10,000.
So what if you started a contingent deficiency fund over the next six years just for this possible scenario? If they come after you during the next six years, you offer them the money you've saved up for this possibility. It's highly likely that they'll settle for that and that will be the end of it.
There's also a very good chance that six years will go by and you'll be past the statute of limitations and they won't be able to come after you any more. What do you do then? If it were me, I'd have a big party or maybe go on a nice vacation and celebrate the start of my new life.
Just remember to take into consideration who you are talking to when getting advice. If you are talking to a bankruptcy attorney, don't be surprised when they recommend a bankruptcy. It might be the best route but I would definately consider other alternatives too.
Comments (8)Subscribe to CommentsComment