I am not going to file BK but need some help here please. I have been told by real estate people,brokers and real estate lawyers that because CA is a non recourse state I can just walk away. I have heard both sides to this and what can happen but havent seen any proof. I would "love" to find some case law or simular cases that prove or disprove what I hear.
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I don't have the cites handy, but my understanding of CA Foreclosure is this:
CA allows both judicial and non-judicial foreclosure. Non-Judicial is the MOST commonly used method.
If the lenders pursue non-judicial foreclosure, there is no "automatic" deficiency. The lender must still go to court to get a "judgment" for the deficiency. Thus, in this sense, CA is a non-recourse state. However, this non-recourse issue, as I understand it, only applies to the foreclosing party. Thus, 2nd mortgages can still come after you without judicial foreclosure.
However, you will still have INCOME TAX consequences to the deficiency because the deficiency is still forgiven debt. Assuming the lender forgives the debt and does not seek a deficiency judgment.
With judicial foreclosure, part of the process is to usually include a request for a deficiency judgment.
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