What Happens with a Deficiency Judgment?

If you’re going through a Texas home foreclosure because of delinquent tax payments, the entire process can be stressful and scary. But what happens if a foreclosure sale doesn’t cover your entire tax liability? If you still owe money even after the sale, the creditor may come after you for the rest of what you owe. This is called a deficiency judgment.

After the Tax Foreclosure Sale

If the foreclosure sale of your home doesn’t pay off your entire tax liability, the county may still seek to recover the rest of the money from you in a deficiency judgment. To do so, the creditor must file another lawsuit within two years of the foreclosure sale of your property. After receiving a personal judgment against you, they can attempt to attach other property or assets you own.

Fair Market Value Offset

However, if your home sells for less than your debt, you can still avoid or minimize a deficiency judgment. You can bring suit in the county where your property is located within 90 days of the foreclosure sale, requesting a fair market value offset of what you owe. You can also respond to the creditor’s deficiency judgment suit requesting a credit. If you can submit evidence that the fair market value of your home on the date of the foreclosure sale was more than the home sold for, the court may offset any deficiency judgment with that amount. 

For example, if you owed $250,000 in taxes and your county foreclosed on your home and sold it for $200,000, you could have a deficiency judgment for the additional $50,000. But if you can show the court that the fair market value of your home at the time of the foreclosure sale was $240,000, the court may credit you with the $40,000. This could reduce a deficiency judgment to $10,000 from $50,000. Because foreclosure sales often result in a sale price well below fair market value, in many cases, it is worth it for you to consult an attorney and request a fair market value credit offset of your deficiency judgment.

You Need an Experienced Texas Surplus Funds Recovery Attorney

If you’re facing a tax foreclosure or a deficiency judgment after a foreclosure, it’s important to know and understand your options. The process can be challenging to unravel, but an experienced Texas foreclosure attorney can help guide you and minimize what you owe. Call the skilled tax foreclosure attorneys at Manfred Law at (713) 547-5460. Or contact them online to schedule your consultation.