Understanding Arizona Anti Deficiency Laws

A deficiency judgment occurs when a lender forecloses on a property. The property is sold and they hope to regain the money that they lost as a result of the foreclosure. This can occur with any type of property including both residential and commercial. A deficiency judgment is then requested through the court system against the previous owner. This judgment allows the lender to recover the difference between the sale price of the property and the amount owed on the loan. Understanding Arizona anti deficiency laws is important for those involved. This is only related to real-property. There can also be deficiencies on car loans and personal property loans, but they are subject to different laws.

About Arizona Anti Deficiency Laws

There are laws in place in Arizona to protect property owners against the collection of deficiency judgments. There are several criteria that must be met in order to be protected by these laws. The property must be 2.5 acres or less in size, the property must be a single family residence, and it must have been sold according to the Trustee’s power of sale. It is important to note that commercial properties are not covered by this legislation, nor is raw land even if it is for residential purposes.

What to Do If You Default On Your Loan

There are some things to know before you default on your property loan. First, you may be able to negotiate with your lender. There may be some circumstances where the mortgage company or bank will allow for a special circumstance. This may provide you with a limited time to get caught up on your payments or may allow a period of time with lower payments. This could extend or change the original terms of your loan agreement.

If you are not able to arrange for special circumstances with your lender, you may be eligible to take out another loan against the property. This is called a second mortgage. If you have substantial income and assets that can be used as collateral, you may be able to qualify for this type of loan. Also, some borrowers can benefit from bankruptcy, allowing them to keep their homes and either reorganize or liquidate their other debts. Before you make any decisions regarding your loan you should discuss the matter with your attorney and accountant.

Deed in Lieu of Foreclosure

In some cases, it may be beneficial to settle the loan before it goes to foreclosure. This will effectively keep your loan from showing up as a foreclosure, which could be detrimental to your credit score and negatively impact your ability to get future loans. A deed in lieu of foreclosure is an arrangement that allows you to provide your property deed to your loan company in exchange for ending the loan terms. Another alternative is a “short sale.”

If you are facing financial difficulties and are unable to meet the terms of your personal or business loan, contact Udall Shumway to discuss your available options.

This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Arizona Anti Deficiency Laws, or any other litigation matter, please feel free to contact us at 480.461.5300,  log on to udallshumway.com,  or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley