Legal Question in Real Estate Law in North Carolina

I take it that you are upside down and you want to know if you can "walk away" from your mortgage. It depends.

In NC, the lender is allowed to seek what is called a deficiency judgment. Deficiency is the difference between what is owed less whatever the property is sold for. The lender has one year to seek a deficiency judgment.

NC has an anti-deficiency statute. However, this only applies to mortgages that are seller-financed, not mortgages that are financed by third-parties, like banks. The laws in NC are very pro-lender.

Will the lender come after you for a deficiency? It depends on your circumstances, what other assets you have, things like that. If that happens, you have a couple of options: (1) if you have enough resources, often a deficiency can be negotiated for a fraction of what you owe; or (2) if negotiation is not possible, then you can always file for bankruptcy. You can also defend any deficiency action by showing that the property sold was fairly worth the amount of the debt secured by it at the time and place of sale or that the amount bid was substantially less than its true value.

If the lender gets a deficiency judgment against you, it is like any other judgment. The lender can try to collect on the judgment. The judgment will last for 10 years and can be renewed for another 10 years. The judgment earns interest at a rate of 8% per year. And the judgment can be enforced against other assets that you have that are not exempt. Your bank account can be levied upon, but there is no wage garnishment in NC. Also, a judgment could be transferred to other states if you leave NC and can be registered and enforced in those states. The problem is that if you move to a wage garnishment state and the judgment follows you, the lender can then garnish your wages. So options 1 or 2 are preferable to allowing a judgment to be entered.