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If I either walk away from the house, sell the house in a short…

Customer Question
If I either walk away...
If I either walk away from the house, sell the house in a short sale, or do a "Deed in Lieu" with the bank, Am I on the hook for the shortfall of the loan. I have a small savings, a second home, and a 401k. I do not wish to lose any of the above since I am already going to lose a significant amount on the house.
Submitted: 8 years ago.Category: Real Estate Law
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Answered in 4 minutes by:
6/17/2010
Real Estate Lawyer: GoLaw, Lawyer replied 8 years ago
GoLaw
GoLaw, Lawyer
Category: Real Estate Law
Satisfied Customers: 753
Experience: Attorney and landlord with ten years experience advising landlords and tenants
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What you are seeking to avoid is a deficiency judgment (the difference between the balance of the mortgage and the amount that the house sells for.) In Illinois, a lender can seek a deficiency judgment if the property is sold at a judicial public sale. However, deficiency judgment are not available in cases where there is a consent foreclosure (in other words, you agree to the foreclosure) or where the lender takes the property by deed in lieu of foreclosure.

 

As far as your assets go, your 401k is most likely not subject to any judgment. However, your savings and other real property would be subject to any judgment against you.

 

I hope you found my answer helpful. Please click on the GREEN ACCEPT button above for my answer. This is necessary for me to be paid for my work and so that I can get credit for assisting you. Your question will not close, and you will still have the opportunity to follow-up if needed. Please use the REPLY button to ask follow up questions.

 

This response is based upon the information provided in your question. If there is additional relevant information or you believe that I may have misunderstood or misread your question, please REPLY and let me know. I want to make certain that you receive as accurate information as possible. Thank you.

GoLaw
GoLaw, Lawyer
Category: Real Estate Law
Satisfied Customers: 753
Experience: Attorney and landlord with ten years experience advising landlords and tenants
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Customer reply replied 8 years ago
Clarify - If I consent and the bank agrees to the forclosure or the Deed in Lieu, they cannot come back for a judgement
Real Estate Lawyer: GoLaw, Lawyer replied 8 years ago

By way of clarification, a consent foreclosure is more than you simply not objecting to the bank's foreclosure. The bank must agree to proceed with it as a consent foreclosure too. As part of the consent foreclosure, the lender affirmatively agrees to waive its right to a deficiency judgment. (735 ILCS 5/15-1402). Likewise, under Illinois law, a lender accepting a deed in lieu of foreclosure cannot seek a deficiency judgment Sec. 15-1401

 

In summary, if you do a consent foreclosure or a deed in lieu of foreclosure, under Illinois law, the bank cannot seek a deficiency judgment against you.

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