Pennsylvania Amends Provisions Regarding Deficiency Judgments
by: Lee Greenberg
The state of Pennsylvania recently amended provisions of the Pennsylvania Consolidated Statutes regarding deficiency judgments in House Bill 84. The legislation is effective immediately.
Under the new law, the following actions must be commenced within six (6) months following execution and delivery of the sheriff’s deed for property sold in connection with the execution proceedings:
- A petition for the establishment of a deficiency judgment; and
- A petition for redetermination of fair market value.
Petitions for the Establishment of a Deficiency Judgment
The law mandates that whenever any real property is sold to the judgment creditor in execution proceedings and the price is not sufficient to satisfy the amount of the judgment, and the judgment creditor seeks to collect the balance due on the judgment, the judgment creditor shall petition the court to fix the fair market value of the real property sold.
Such a petition must be filed as a supplementary proceeding in the mater. If the judgment was transferred from the county in which it was entered to the county where the execution sale was held, then the judgment will be deemed entered in the county in which the sale took place.
Any debtor and any owner of the property affected by the petition that is neither named in the petition nor served with a copy or notice of the filing will be deemed discharged from all personal liability to the judgment creditor on the debt. However, such failure will not prevent proceedings against those named and served.
If an answer is filed alleging as the fair market value an amount in excess of the fair market value of the property as stated in the petition, the judgment creditor may agree to accept as the fair market value the value stated in the answer. In such case, the judgment creditor may file a stipulation releasing the debtors and the owners of the property affected from personal liability to the judgment creditor to the extent of the fair market value stated in the answer.
After a determination by the court of the fair market value of the property sold, the debtor shall be released of all liability to the judgment creditor to the extent of the fair market value of the property as determined by the court, and also be released of such liability to the extent of any amount by which the sale price, less such prior liens, costs, taxes and municipal claims, exceeds the fair market value as agreed to by the judgment creditor or fixed and determined by the court. Thereupon the judgment creditor may proceed by appropriate proceedings to collect the balance of the debt.
Petitions for Redetermination of Fair Market Value
If the execution sale of a parcel of real property is concluded and the judgment creditor is the purchaser of the parcel at the sale, then either the judgment creditor or the debtor may file a petition with the deficiency court seeking a redetermination of the fair market value of the parcel provided the petition is filed within the six-month period.
If the petition is filed in a timely manner, the deficiency court shall re-determine the fair market value of the parcel. The re-determined value shall be the fair market value of the parcel for all purposes.
The filing of the petition for redetermination shall not limit or affect the judgment creditor’s ability to execute on the real property collateral unless and until the value is re-determined by the court. However, where the debtor alleges in its petition that an appropriate redetermination of value by the court with respect to the property that has already been sold to the judgment creditor at an execution sale would be sufficient to satisfy the judgment in full, the deficiency court may issue a stay of further execution proceedings pending the court’s ruling on the petition for redetermination of value.
The debtor shall be released and discharged from liability for the payment of the debt to the extent of the fair market value determined by the deficiency court of all real property collateral purchased by the judgment creditor in execution proceedings on the judgment, less deductible items and the amount distributed to the judgment creditor as a result of the sale of the real property collateral purchased in the proceedings by third parties.
About the Author
Lee Greenberg, J.D. is Vice President and Regulatory Compliance Director at Bankers Advisory. Lee is a graduate of the University of Colorado at Boulder and earned his J.D. at the New England School of Law. He is admitted to the bar in Massachusetts. He can be reached at lee@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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