Hawaii Foreclosures

Question: My brother owns a residence in Hawaii that may go into foreclosure. He now lives on the mainland. If the bank in Hawaii gets a deficiency judgment, can it be enforced against him on the mainland? If the house forecloses, can anyone garnish his wages or take money from his bank account/401k? Someone told me Hawaii foreclosures does not allow this. I’m not sure if that’s true or not. Your help would be greatly appreciated.

Answer: – Typically when a home gets foreclosed upon, doesn’t matter if it’s on the mainland or a Hawaii foreclosure, 2 things will happen. Either A, the homeowner will get a 1099. This means that the bank has decided to write off the amount they lost and the homeowner will count that as income on his or her next taxes. The great part about a 1099 is that in many cases it can be negated. Most people in this situation qualify as being insolvent. So in most cases the 1099 can be wiped out. Talk to your accountant and he’ll be able to help the individual to see if they qualify.

The other option is a bit more harsh which is a deficiency judgment. Although they don’t like to go this route because it costs them even more money out of pocket and what happens more often than not is the homeowner will just file bankruptcy. One of the main reasons they pursue a deficiency judgment is if they believe the homeowner has money or assets. If the homeowner has money or assets, then the bank might be able to recover some of their losses either through wage garnishment, a settlement, or through bankruptcy.

One of the tricks to avoiding the deficiency judgment if the home in Hawaii forecloses would have been to try and do a short sale and ask for a complete satisfaction. This means they give up their rights to go after the homeowner for any losses. All they can do is 1099 them which is what you want. At this point, if the home has already foreclosed, then you’re at the mercy of the bank to determine what they will do next. And usually they have up to 3 or 4 years depending on your states laws to file that judgment.