FAQ - THE REMEDIES GENERALLY, FOR DEFAULT - FORECLOSURE IN ARIZONA
THE REMEDIES GENERALLY, FOR DEFAULT:
QUESTION: Explain the different remedies for a loan default, please?
ANSWER: In general law and just as in the other states, above, the loan secured by real estate may be enforced by the lender or holder of the instrument either suing the debtor directly on the promissory note the debtor signed, or by conducting either a judicial foreclosure (in a court) or a non-judicial trustee sale (the latter on trust deeds loans, only). Under the law (UNLESS THE DEBT INSTRUMENT WAS A NON-DEFICIENCY INSTRUMENT--SEE BELOW) the creditor sells the house either for enough to get the entire loan paid off (and the creditor keeps the payoff up to the amount of the remaining loan and expenses to foreclose it) or it sells short of that debt amount (very common, recently, due to adverse market conditions) and if there is a shortfall, the creditor can collect the shortfall from the debtor even after the property has been sold on the foreclosure sale.
BUT THE CREDITOR CANNOT do this if the instrument is one that falls under the "ANTI-DEFICIENCY" STATUTES, BELOW. MOST HOME MORTGAGES DO FALL UNDER THE PROTECTION OF THE ANTI-DEFICIENCY STATUTES AND THAT MEANS NO "DEFICIENCY" AGAINST THE DEBTOR IN A FORECLOSURE. See below for what qualifies. But even when there is no deficiency, there can be IRS and credit ramifications, of course, as explained below.