Can Mortgage Companies Garnish Your Wages in Michigan After Foreclosure?

Foreclosure Deficiency

When a mortgage lender forecloses, the lender causes your home to be sold in order to raise money that the lender can use to satisfy your mortgage loan. Foreclosure sales often do not produce enough money to fully satisfy the underlying mortgage law. The difference is called a deficiency, and Michigan law generally allows mortgage lenders to collect the deficiency from the borrower. Technically, a deficiency is the difference between the fair market value of the home at the time of the foreclosure sale and the amount outstanding on the mortgage loan. Often, the home actually sells in the foreclosure sale for less than the fair market value.

In order to collect a mortgage deficiency after foreclosure, a mortgage lender must file a lawsuit to obtain a deficiency judgment. A deficiency judgment is a court order requiring the borrower to pay the deficiency amount to the mortgage lender. The lender can only seek a deficiency judgment in Michigan if the lender ends up purchasing the property at the foreclosure sale. If a third party purchases the property, then the lender cannot pursue a deficiency judgment.

After a mortgage lender obtains a deficiency judgment, the lender can generally force that judgment by garnishing wages. In order to garnish wages, the lender must obtain a separate garnishment order from the judge. This requires further court proceedings even after the lender obtains the deficiency judgment. The lender will first question you regarding your employment and then apply to the court for a garnishment order.

Your employer is legally required to comply with a garnishment order. This means your employer will have no choice but to pay your mortgage lender a specified portion of each paycheck the employer issues to you. The employer will make the payment directly to your lender. In certain circumstances, you may be able to limit the percentage of your wages garnished each pay period if you can prove that you need the money for essential survival purposes, such as food, clothing, shelter and transportation.