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Deficiency Balance to Deficiency Judgment: Then Bankruptcy

Deficiency means it’s simply not enough. It’s not enough that you lost a vehicle to a repossession or a home to foreclosure therefore the debt must be repaid in full. The deficiency balance reminds you that you’re not quite done with your lender or in most instances, your third party debt collector.

A deficiency balance is an obligation to repay the portion of an obligation that arose from the liquidation of a certain property you had once financed. It can arise from a repossessed vehicle or a home lost to foreclosure sold at an auction for an amount far less that what was owed on the loan. Hence the deficiency balance.

Like most people that finance a vehicle, by the time you drive the it off the dealer lot, you’re already “upside down” because vehicles typically lose value or depreciate rapidly. The rampant foreclosures also cause millions of homes across the country to sharply decline in value and that difference between that market value of the property and loan balance leaves the property owner [home or vehicle] on the hook if the vehicle or home is ever seized or liquidated.

A deficiency balance ignored can deteriorate into a deficiency judgment which means that the finance company has requested the court’s intervention in seeking to collect the debt. As a result, the court can facilitate a wage garnishment or a bank account freeze against you. When this happens, filing bankruptcy may be the only option [other than satisfying the lien] to immediately release the court’s order attaching your pay check or bank account. Hiring bankruptcy attorney san diego will help you do the job or the process easier. Being in this situation is certainly a frustrating and stressful phase, hence, having someone on your side who knows the legal system will help you feel ease and less worried.

In this scenario, I’m often asked to assist with a bankruptcy filing and with the additional requests to remove the wage garnishment or bank account freeze. As a Bankruptcy Petition Preparer, I carefully review the debtor’s consumer credit report to properly identify the creditor responsible for reporting the deficiency balance.

Properly identifying the “deficiency balance” creditor is critical as an improper identification can jeopardize the relief sought. The credit report has all the pertinent details necessary to make the necessary application [in the bankruptcy] to release the wage or bank account attachment. The credit report also provides details such as full balances owed, accounts sold to third party debt collectors, and the location of the court in which deficiency judgment was filed.

Although I do make my introduction to households in the unfortunate context of bankruptcy, homeowners and debt distressed households seeking the relief do appreciate the option of filing bankruptcy without an attorney as bankruptcy attorney fees can often be a barrier to obtaining needed relief.

By the time someone seeks my assistance, too often the deficiency balance has become a judgment which eliminates the potential for the debtor to negotiate a payment plan with the creditor. Both a wage garnishment and bank account freeze are a form of asset seizure which occurs when the deficiency balance is ignored.