Can the lender come after you for the rest? Deficiency judgments in Alabama

Deficiency rules in Alabama, point by point

• No Alabama law bars a deficiency

  After any foreclosure sale

  We searched the Code of Alabama and found no section that bars or caps a deficiency after a mortgage foreclosure. We also found no statute that makes the court credit you with the home's fair market value instead of the sale price, so the sale price can matter a great deal.

• The lender must sue you and win

  Before any collection can start

  An out of court sale under a power of sale transfers the house to the buyer. It does not by itself create a money judgment against you. To collect a shortfall, the lender has to file a lawsuit on the debt and get a judgment from a court.

  Ala. Code § 35-10-12

• Time limit to sue

  Six years for written promises and loans

  Alabama gives six years to bring actions founded on written promises not under seal and actions to recover money on a loan. When that clock starts for a deficiency claim is not spelled out in the statute, so ask a lawyer if a lender sues you years after the sale.

  Ala. Code § 6-2-34

• Short sale or deed in lieu: get a written release

  Before you sign

  Alabama has no statute that cancels the rest of the debt after a short sale or deed in lieu, so the written agreement controls. Ask for a clear release of any remaining balance. Under Alabama's redemption law, if you give up the home before a sale and the lender releases you from the debt, your right to redeem ends; if you stay liable on the debt, you keep it.

  Ala. Code § 6-5-248(e)

• How long a judgment lasts

  10 years, and never revived after 20

  If 10 years pass after a judgment is entered without an execution being issued, or 10 years pass since the last execution, the judgment is presumed paid and the lender must prove otherwise. A judgment cannot be revived more than 20 years after it was entered.

  Ala. Code §§ 6-9-190, 6-9-191

• Wage garnishment limits

  Only after a judgment

  If a lender gets a judgment and garnishes your wages, Alabama protects 75 percent of your wages, salary or other pay for personal services from garnishment for debts. Your employer holds back no more than 25 percent until the amount the court lists is paid.

  Ala. Code § 6-10-7

• If you get a deficiency letter or lawsuit

  Right away; meet the deadline on the summons

  A letter is not a judgment, but a lawsuit is serious. Do not ignore court papers. Contact Legal Services Alabama or the Alabama State Bar Lawyer Referral Service, and bring your foreclosure notices, the sale price and any short sale or deed in lieu papers.

The short answer in Alabama

Common questions in Alabama