How does deficiency judgement work in Michigan?

puppa · Joined: 10 Mar 2008 Posts: 1 1.36 Dollars($)

Are lenders still able to obtain a deficiency judgement after sheriff sales on foreclosed homes in Michigan? It is very confusing. Before they issued a 1099c for your forgiven amount. However, I understand that these 1099c are not being issued any longer. Does this mean that deficiency judgment is assumed? Also, does Michigan have anti-deficiency laws? If the mortgage is for the purchase of a dwelling occupied by the purchaser, is the purchaser not responsible for any deficiency?

larry · Joined: 27 Jun 2007 Posts: 2951 411.26 Dollars($)

Hi puppa,

Welcome to the forum.

The lender can still sue you for delinquency judgment. Michigan is not an anti-deficiency state. So the lender can ask you if the sale price less than the amount you owe to the lender.

1099c is only issued if the lender forgives you debt but now you need not to pay tax on the forgiven debt as per the Mortgage Debt Forgiveness Tax Relief Act. Know more about it at - http://www.mortgagefit.com/tax/debtforgiveness-reliefact.html

Feel free to ask if you have any further questions.

Best of luck,
Larry

Guest 0.10 Dollars($)

Do you know how long they have to decide to file for a judgement? Also, can I request a 1099c? to make sure they cannot get a judgement?

jameshogg

Hi Martin,

Welcome back.

The purchaser of a property in Michigan is responsible for the deficiency judgment if the court orders him to do so. The judgment is filed only after the sale because the lender doesn't know exactly what the bidding amount will be.

Most probably the statute of limitation, that is the period up to which the lender can file the deficiency judgment is 4 years in Michigan. The statute varies from one state to another.

Now, if the lender cancels the deficiency as a result of negotiation, then you may be sent a 1099-c form just to keep in writing that the debt has been canceled. But this does not mean you'll have to pay tax.

Thanks

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