For homeowners who have lost their home to a foreclosure due to their inability to keep up with mortgage payments, there may still be bad news on the horizon. After banks sell the home at auction, any balance remaining on the value of the home and the sale price at auction make come back billed to the previous owner.

Falling home prices have lead to homes being sold for less than what is still owned. Homeowners who have lost their jobs or their ability to pay back mortgage loans often sell quickly through a short sale for less than what is owed out of desperation. Those who find themselves in foreclosure may think they are better off than sellers because the debt has been relieved only to find out later there is a delinquency judgment against them for a remaining balance after the home has been resold for less. Oftentimes, the thousands of dollars in delinquencies are more than an individual can financially bear, forcing them to file for bankruptcy.

Will It Happen to You?
You may still be responsible for the costs of your foreclosed home but it will depend on a number of factors. First, it matters what state you live in. To date, 30 states can pursue deficiency judgments including in Florida, Texas, and New York. California is one of the state that do not allow such judgments. It will also be influenced by your other mortgages or property liens. However, once a judgment is rendered, your financial life can be heavily investigated. You may be required to turn over all of your financial records, have money garnished from your pay, and you can even wind up in jail per a judge’s orders. If you are looking to do a short sale on your home before it goes into foreclosure, seek the assistance of a real estate attorney to ensure you are protected from future financial obligation.

What Happens If You Are Delinquent?
Some lenders will not pursue you immediately. They may monitor your financial situation until they know you are again stable before pursuing the debt with interest. Depending on your state, a lender may have between 5-20 years to collect on a debt. In other cases, many banks and lenders quickly turn over the account to a third party, who may be an aggressive debt collector ready to pursue the debt at all costs. Experts caution sellers to pay close attention to what documents they are signing for the sale and be sure there are no agreements included that state the seller is still liable for remaining debts. Since many people follow the orders of a realtor without asking questions, they have ended up implicating themselves with a single signature.

With foreclosures and judgments coming fast and furious, it is advisable that consumers seek legal assistance before making a move to sell or when dealing with a foreclosure. By checking the laws in your own state, you may be able to prevent a delinquency judgment on your home now and in the future.