How a Deficiency Judgment Is Obtained
The lender files a lawsuit for the deficiency. If you do not respond, a default judgment is entered. The lender must prove the deficiency amount and that the sale was commercially reasonable.
Enforcement Methods
With a judgment, the creditor can: garnish wages (up to 25% of disposable income), levy bank accounts, place liens on real property, and in some states seize non-exempt personal property.
Judgment Proof Status
If your income is from Social Security, disability, or other exempt sources and you have no non-exempt assets, you may be judgment proof. Bankruptcy permanently eliminates the judgment debt.
Frequently Asked Questions
Can they garnish my wages?
In most states, yes, after obtaining a judgment. Federal law limits garnishment to 25% of disposable earnings. Texas, Pennsylvania, South Carolina, and North Carolina severely restrict wage garnishment.
Can they take money from my bank account?
Yes, through a bank levy. However, Social Security, disability, veterans benefits, and other government benefits are exempt. Banks must protect two months of exempt benefits automatically.
How long does a deficiency judgment last?
Typically 10-20 years, renewable in most states. Bankruptcy is often the most effective way to permanently eliminate it.
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