Can creditors garnish your wages after a ransom?
This cannot be answered with a yes or no as it is dependent on your state and mortgage terms. However, for the most part it is illegal for any institution (other than a few government agencies) to garnish your wages without first suing you.
That brings the question; can a mortgage company sue for the difference between the amount owed and the amount of the foreclosure sale? Again this will be dependent on the state you live and your mortgage terms. However for the most part it is an option that mortgage companies can use, although it is uncommon.
Mortgage companies lose an average of $100,000 per foreclosure. Suing a client will take years and also cost doubles the amount in legal fees. Therefore lenders tend to cut their losses and do not pursue legal action. The exception to this is if you, the borrower, owe a very significant amount and they thought they would be able to recoup more money than they would lose by pursing legal action.
One thing that most people in the foreclosure process may not realize is that while the mortgage company may decide not to go after you for the difference in a foreclosure, the IRS will. The government will not see the foreclosure. All they will see is a large debt paid off and portion of that debt forgiven. Therefore they will count the difference from the sale price and the amount owed as income. Therefore Uncle Sam may just hit you with a fairly hefty bill come tax time.
One way to ensure that the mortgage company and the IRS will come after you for money, claiming bankruptcy. But this is not recommended at all.
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