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Tuesday, 29 June 2010 00:00

Wisconsin Foreclosure Law – What You Need to Know

Are you behind in your mortgage payments? You are not alone.  In these difficult economic times, the loss of a job or a reduction in take-home pay may put you in a bind.  If you do fall behind on your payments for your home, here is what you need to know.  Wisconsin allows a lender to foreclose on a mortgage or a deed of trust if in default via a judicial process.

Judicial Process 

The judicial process involves the lender filing a lawsuit to obtain a court order to foreclose the lien of the lender’s mortgage.  It is used when there is no power of sale provided in the mortgage.  After the court grants a judgment of foreclosure, your home will be auctioned to the highest bidder. In Wisconsin, no sale may be pursued for one year from the date of the judgment unless your lender gives up its right to any deficiency, i.e., the difference between the winning bid and what you actually owe.  If the lender waives any deficiency, the delay is six months, or two months if you abandon your home.  You may, in an agreement with your lender, consent to an earlier sale.

Short Sales and Deeds in lieu of Foreclosure

Two possible alternatives to a foreclosure are a short sale or deed in lieu of foreclosure.  A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.  Lenders may be willing to do this to avoid the costs of a foreclosure.  The benefit to you is that the lender may be willing to forego pursuing the deficiency that results from the sale.  Thus, through proper negotiation with the lender, it may be possible to get out from under your mortgage obligations and not owe the bank any additional amounts.  However, this is the lender’s decision.

It is important to note that these sales can take a substantial amount of time prior to the lender approving them.  You may also need to submit to the lender more 

information then you did to get the loan and take any actions they request, such as marketing the property. In a short sale, the virtue of patience will be necessary.

Another possible way to avoid foreclosure is a deed in lieu of foreclosure.  Essentially you deed your property to the lender in exchange for the lender cancelling the loan.  The lender agrees to not initiate, or will terminate, any existing foreclosure proceedings.  Again, though, you will need to negotiate a forgiveness of any deficiency with the lender prior to completing this procedure.

Both procedures may be difficult, if not impossible, where there are multiple lenders or lien holders. It is also important to note in both cases that if the lender does forgive the deficiency there will be income tax consequences since debt forgiveness is considered income to you unless certain exceptions apply.  Dempsey Law’s experienced tax attorneys can assist you with those considerations.


Dempsey Law’s experienced Real Estate attorneys understand the law and the foreclosure processes, know and have dealt with many of the lenders and real estate agents in the area, and can provide assistance to you in dealing with your lender and helping you avoid foreclosure, if that is possible, or otherwise protect your interests in the process.

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