Q: A bank foreclosed on me and the courts confirmed the foreclosure sale. I had a personal guarantee on the loan. Is this a judgment? What further steps must the bank take to force me to pay the deficiency?  

A:  The answer is sure to be different if you are the direct borrower on the note or a personal guarantor. Georgia law requires lenders to confirm a foreclosure sale before they can pursue a deficiency against the borrower. The confirmation process does not result in a money judgment—instead, the court confirms that the lender followed Georgia’s procedural rules for a non-judicial foreclosure sale (correct notice, advertising, etc.) and that the lender sold the property for its true (or fair) market value.

To secure a money judgment against either the borrower or guarantors, the lender must file a lawsuit for breach of contract. If a lender forecloses on the property first, it cannot sue the borrower unless it confirms the sale. As a result, if the judge denied the confirmation of the foreclosure sale, the lender could not seek a deficiency judgment. This same law previously applied to guarantors as well. Recent cases from the Georgia Court of Appeals have changed this long-standing rule. Now, Georgia courts are allowing a lender to sue a guarantor for breaching the guaranty even if the lender failed to confirm the sale IF the court finds that the guarantor waived Georgia’s confirmation law’s protections in the guaranty. Under this new line of cases, the guarantor must look closely at the guaranty’s language to determine if he/she waived the applicable defenses. If these defenses were waived, the lender can seek a deficiency.

Once the lender obtains a deficiency judgment, it can record the judgment, which creates a lien against all of the judgment debtor’s property located in that county. The lender can attempt to collect on the judgment by garnishing the judgment debtor’s bank accounts or wages. If the judgment debtor owns a company, it can file for a charging lien, which results in any distributions that company makes to the judgment debtor to go to the creditor instead. The lender can also conduct a sheriff’s sale to sell any unencumbered assets, including automobiles, boats, and personal property (jewelry, art, etc.).

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The information contained in this column: (1) is not provided in the course of and does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Readers of this newsletter should contact their attorney to obtain advice with respect to any particular or specific legal matter. No reader of this newsletter should act or refrain from acting on the basis of information contained herein without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney, with full and complete knowledge of the relevant facts, can provide assurances that the information contained herein – and your interpretation of it – is applicable to your particular situation.