Source: https://dianedrain.com/category/real-estate/deficiency/
Timestamp: 2019-04-22 12:09:29+00:00

Document:
Deficiency is the debt owed to the lender. Typically the amount that is owed after a home is foreclosed or vehicle is repossessed. Each state has different laws that protect their residents.
WARNING TO THE WISE: Never do a short sale, deed in lieu of foreclosure, allow a trustee’s sale, or a foreclosure to go forward without first obtaining both legal and tax advice. You cannot undo serious mistakes once the process is completed.
What is a Trustee’s Sale or Foreclosure?
A trustee’s sale or foreclosure is the process that the lender may use when the loans are not paid or there is some other default of the original loan agreement.
The law of the state where the property is located controls the foreclosure or trustee sale process. The links to this page deal solely with Arizona law as governing Arizona real property.
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If you are NOT an attorney it is important to educate yourself, but this is not the place to do it. You must obtain legal advice from an experienced attorney familiar with your unique situation. Fixing unintentional errors will cost far more than doing it right the first time; if it can be fixed at all.
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Warning – some of these references are pre-BAPCPA.
Typically unsecured liens do not exist after bankruptcy because the liens did not attach to anything before bankruptcy. The judgments are void per 11 USC 524(a)(1). A void judgment cannot create a post-petition lien. Therefore the judgments do not attach as liens to property acquired post-petition.
It is true that pre-petition liens on nonexempt property survive bankruptcy, but that requires that the liens have attached pre-petition to property owned pre-petition.
Note: The recorded judgment lien survives the bankruptcy. The creditor can go after real property the debtor owned at the time of filing the bankruptcy that secures that lien. This is the reason why these liens must be avoided under 522, irrespective of the Haines decision in Rand that the lien does not attach to debtor’s homestead. 522 addresses an “interest” in debtor’s property in support of a lien avoidance. Irrespective of the fact as to whether there is equity in the property, or that the homestead exemption is not affected by a lien, a debtor’s interest is impaired, and thus avoidance is appropriate, otherwise, what is the point of 522? The point of 522 is to give the debtor a fresh start and that is not achieved by the refusal to avoid a lien which will remain in place post discharge and could eventually be foreclosed when property values increase.
It appears that the judgment lien and the right to enforce that lien survive a Chapter 7. If the judgment creditor seeks to enforce its lien prior to the expiration of that lien, perhaps the owner could file a Chapter 13 and pay the creditor the value of the excess equity. Sales to enforce Judgment liens are done by Sheriff’s sale and somewhat rare. The expense in the form of bonding the Sheriff of this procedure make it very price prohibitive.
Pacific, et al. v. Castleton, et al. December 27, 2018 – 1 CA-CV 17-0667 – Whether a judgment creditor may attach a judgment lien to homestead property, or whether it may execute on its judgment only by way of a forced sale of the property under Ariz. Rev. Stat. section 33-1105.
Section 33-964 thus establishes the general rule that a recorded judgment does not become a lien on homestead property. See also Union Oil Co. of Ariz. v. Norton Morgan Commercial Co., 23 Ariz. 236, 245 (1922) (holding that “no lien shall be permitted to attach to the real property claimed as a homestead”).
33-964 establishes the general rule that a judgment lien does not attach to homestead property, and that homeowners hold their homestead property free and clear of judgment liens. See A.R.S. § 33-964(B). Although it is true that once a lien has attached, it “runs with the land,”, but in this case the judgment lien never attached to the Home in the first place.
When a homestead exemption is abandoned by a conveyance of the property, the judgment lien does not re-attach to the property upon the sale. See Sec. Tr. & Sav. Bank, 29 Ariz. 325, 332 (1925).
33-1104(A)(3) a homeowner “may remove from the homestead for up to two years” without abandoning the homestead exemption. Sepics’ departure from the Home shortly before its sale did not constitute an abandonment.
Because of the protection afforded by the homestead statutes, the Judgment never attached as a lien to the Home. Therefore, the Sepics conveyed the Home free and clear of the Judgment.
In re Charnock, 318 B.R. 720 (BAP 9th Cir, 2004) has the legislative history of 522(f)(2) and says that the debtor may avoid a judgment lien recorded before a consensual lien regardless of state law, because Congress wanted to favor consensual liens regardless of the priority of recording.
Harle v. Williams: No. 1 CA-CV 17-0665 (Az Ct Appeals, Div One 3-14-19) Holds that the enforcement period on a judgment is tolled until the judgment is executable, and this judgment wasn’t executable until the date of William’s breach.
Harle and Williams were business partners, then the partnership split. Harle sued Williams. In 2011 the two reached a settlement in which Williams agreed to a total judgment amount and to make monthly payments. As long as Williams made his monthly payment, according to the terms of the settlement, Harle was precluded from recording or enforcing the judgment. The superior court held the judgment had not expired. After all, the court implied, it would be very unfair to allow a debtor to promise the world to a judgment holder in order to convince them to hold off on recording a judgment, but then back out after 5 years, and leave the judgment holder “[prejudiced in the extreme].” (NOTE – renewal of judgments in Arizona is now changed from 5 to 10 years).
Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ Supreme Court, 7-27-18) Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.
Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2). We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.

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