Q: After a foreclosure sale of my home, if I still owe money on my loans, what can the lender do to me?
A: After the foreclosure sale date, when the house is actually sold, the statute of limitations begins to run. The foreclosing lender must file a complaint in court within six months from the date of the foreclosure sale in order to file within the statute of limitations. If they miss the statutory time period, under normal circumstances, the foreclosing lender cannot file to collect the deficiency. The non-foreclosing lender has six years to sue to collect the deficiency on its note.
Q: How does a lender collect a deficiency?
A: When you took out your loan, you gave the lender a Deed of Trust that allows them to sell the house to collect on the loan. Under Nevada law, a holder of a Deed of Trust can do this without going to court. The procedures are set forth in the Nevada Revised Statutes. After your home is sold, there will be a “deficiency,” which is the difference between the amount you owe to the first and second lenders and the amount the house is sold for. In order to involuntarily collect that deficiency from you, the first and second lender have to file lawsuits against you within the statute of limitations set forth above. There will be a hearing and you can present and gather evidence. When a decision is made that you have to pay a certain amount to the first and/or second lender, that decision by the judge is a “judgment.” The creditor then has to enforce that judgment, that is, try to collect it from your wages or assets.
Q: What happens to my credit rating?
A: The deficiency amount owed after the foreclosure remains a debt obligation. Even if a lender cannot sue you to collect it, the debt is still valid. Most lenders will not clear the debt from your credit rating. Anecdotal evidence suggests that the debt will remain on your credit rating for at least seven years.