A deficiency judgment in the context of foreclosure in New Jersey refers to a legal claim by the lender for the balance owed on a mortgage if the sale price of the foreclosed property is not enough to cover the debt. Here’s how it works:
- Calculation of Deficiency: After a foreclosure sale, if the sale amount is less than the amount owed on the mortgage (including principal, interest, fees, and other costs), the lender may seek a deficiency judgment for the difference.
- Lender’s Legal Action: To obtain a deficiency judgment, the lender must file a separate legal action after the foreclosure sale.
- Borrower’s Liability: If the court grants a deficiency judgment, the borrower is liable for the remaining balance. This could potentially lead to wage garnishment, bank account levies, or other collection actions.
- Fair Market Value Consideration: New Jersey law allows courts to consider the fair market value of the property when determining the amount of the deficiency judgment.
- One Action Rule: In New Jersey, lenders are generally required to seek a deficiency judgment as part of the original foreclosure action, known as the “One Action Rule.”
- Legal Representation: Given the complexities and potential financial implications, it is advisable for borrowers facing a potential deficiency judgment to seek legal representation.
Worried about a deficiency judgment in New Jersey? Contact us to understand your potential liabilities and explore your legal options post-foreclosure.
Call us today at (973) 500-8024 or (212) 960-8308, or submit your contact information online and we can contact you directly.
