We regularly hear about borrowers’ rights but we rarely ever hear about lenders’ rights. However, lenders are people too, with mouths to feed and families to care for. When a borrower fails to pay back their loan, the loss falls to the lender, who still has to make up for the money in some way. One way they do so is through a deficiency action.
A deficiency action is used by lenders when a homeowner forecloses on their home but when the proceeds from the foreclosure are not enough to cover the cost of the mortgage still owed. The lender must first file a lawsuit; upon winning, they are granted a deficiency judgment, which gives them legal rights to pursue the remainder of their money in one of three ways: wage garnishment, judgment lien, or bank account levy.
If you are a lender and want to know more about your rights as a creditor, reach out to the foreclosure attorneys at Cloud Willis & Ellis. We can help you take the proper steps to efficiently and legally regain the money owed to you.
Wage garnishment is one of the most common ways that creditors go about collecting money from borrowers, so it would make sense that it would be one of the first processes you try. If you know where the borrower works, you can work with their employer to collect wages via their paycheck. However, there are a few things you should keep in mind:
- You cannot take more than 25 percent of a person’s disposable earnings (“disposable earnings” being those left after the employer makes the necessary deductions; this is in accordance with federal law);
- If the debtor has another garnishment against them, you can only garnish whatever is remaining of that 25 percent (for instance, if the federal government is garnishing 10 percent for child support arrears, you may only garnish 15 percent);
- Know that if you pull a second garnishment out on the debtor, state nor federal law will protect them from being fired, and if they are fired, you are out of luck; and
- You cannot garnish the wages of those who make $1,000 or less per paycheck.
Another and more efficient way in which you can get your money back is via a judgment lien. A judgment lien can be taken out against the nonpayer’s personal property, including any real estate that they own. Once a judgment lien is filed and approved, you have security interest in the property; if the debtor has equity in that property, you may foreclose on it to get your money back. You can file a judgment lien against non-real estate as well. For instance, if the debtor has a significant amount of valuable assets (vehicles, fine art, jewelry, etc.), you can claim a stake in those assets as well.
A judgment lien is more efficient in that it can be completed within a matter of months, does not require you to go through a third party (the debtor’s employer), and is not subject to as many consumers’ rights laws.
Bank Account Levies
Placing a levy on a debtor’s bank account is another efficient way to regain your money, and it is made considerably easier if the borrower ever paid you with a check drawn on that account. As with wage garnishments, you cannot take all of the funds within the account, but if there are significant funds in it, you may be able to reclaim all if not most of your money.
Work With a Alabama Foreclosure Attorney
At Cloud Willis & Ellis, we help lenders recover their money quickly, efficiently, and without violating creditors’ rights. If you still have money owed to you even after a foreclosure sale, contact our foreclosure lawyers today for advice on how to proceed. Give us a call today at 205-322-6060 for immediate assistance.