Indiana Deficiency Judgment After Foreclosure: What You Need to Know
Many Marion County and Indianapolis homeowners who lose their home to foreclosure are shocked to discover they still owe money afterward. A deficiency judgment is a court order requiring you to pay the difference between what you owed and what the property sold for at sheriff sale. Here is everything you need to know — and how to avoid it.
What Is a Deficiency Judgment in Indiana?
A deficiency judgment is a court judgment against a borrower for the difference between the mortgage debt and the amount recovered at the sheriff sale. Under IC 32-30-10-14, Indiana lenders can seek a deficiency judgment after foreclosure. Example: you owe $180,000, the sheriff sale produces $140,000, the deficiency is $40,000. The lender can sue you for that $40,000 plus interest and attorney fees.
When Can Indiana Lenders Seek a Deficiency Judgment?
Indiana lenders can seek a deficiency judgment after: a completed judicial foreclosure and sheriff sale, a short sale (if deficiency waiver was not negotiated), and a deed in lieu of foreclosure (if deficiency waiver was not negotiated). The lender must file for the deficiency judgment within a specific time period after the sheriff sale. Not all lenders pursue deficiency judgments — it depends on the lender's policies and the amount of the deficiency.
How to Avoid a Deficiency Judgment in Indiana
The best ways to avoid a deficiency judgment in Indiana: (1) Sell the property before foreclosure — if the sale price covers the mortgage, there is no deficiency; (2) Negotiate a deficiency waiver in a short sale or deed in lieu agreement (must be in writing); (3) File bankruptcy — Chapter 7 can discharge a deficiency judgment; (4) Negotiate a settlement with the lender after the fact. Consult a licensed Indiana attorney for advice specific to your situation.
Indiana Deficiency Judgment Statute of Limitations
Indiana lenders have a limited time to file for a deficiency judgment after the sheriff sale. The statute of limitations under Indiana law is generally 10 years for written contracts (IC 34-11-2-11). However, the specific deadline for deficiency judgment filings after foreclosure may differ — consult a licensed Indiana attorney for the current applicable deadline in your situation.
Selling Before Foreclosure Eliminates Deficiency Risk
The cleanest way to avoid a deficiency judgment is to sell the property before foreclosure for enough to pay off the mortgage. A cash sale to Bartolini Cash Buyers can close in 7 days. Even if the cash offer is below market value, if it covers the mortgage balance, there is no deficiency. If you are underwater (owe more than the home is worth), consult a licensed Indiana attorney about your options before the sheriff sale.
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