Vacant-lot owners can face garnisheement

by Christopher Combs Special for the Republic Apr. 7, 2010 12:00 AM

Question: Four years ago, we purchased a lot in the Arrowhead area of Peoria for $300,000. We paid a $20,000 cash down payment with a mortgage of $280,000. Although it has been difficult, we have kept the payments current on this lot until five months ago. Our neighbor is a real-estate broker, and she says that the lot is worth $80,000. The mortgage lender has now scheduled a foreclosure sale in three months.

My husband and I both work for a large insurance company, and we are terrified that after the foreclosure sale, the mortgage lender will still try to collect on the mortgage loan by garnisheeing our wages. How much will we owe the mortgage lender after the foreclosure sale? Is there a time period for the mortgage lender to collect against us?

Answer: The anti-deficiency statutes protect homeowners from any personal liability after the foreclosure sale on loans used to purchase a home, but they do not protect owners of vacant lots.

After the foreclosure sale, the mortgage lender will probably have a deficiency claim against you for $200,000 ($280,000 loan minus $80,000 value of the lot). The mortgage lender then has 90 calendar days to file a collection lawsuit against you for $200,000. Unless you can prove that the lot is worth more than $80,000, that is, a "battle of appraisers," the mortgage lender will get a judgment against you for $200,000, plus court costs and attorney fees.

After getting this judgment, the mortgage lender can collect against your assets, including garnisheeing your wages. Any garnisheement of wages, however, is generally limited to 25 percent of your net paycheck.

Christopher Combs is a real-estate attorney with Combs Law Group PC. Reach him at azrep@combslawgroup .com.

Vacant-lot owners can face garnisheement