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If I have a money judgement against someone, order their house or car to be seized and the proceeds from the sale are less than the value of loans on that property what happens? Does the creditor have to pay the bank or does the debt stay with the debtor?

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The property seized remains subject to the loan secured by the collateral (e.g. the house or the car), and the lender could foreclose on that loan against the new owner who acquired the property via a foreclosure on the judgment lien, unless and until the debt secured by the collateral is paid off in full by someone.

The debtor would also continue to be personally liable on the secured debt and could be sued by the lender without regard to the security for the full amount of the debt owed without any credit for the value of the collateral not foreclosed upon.

But, any amount actually collected on the loan by the lender from someone other than the original debtor, for example, if the lender actually did foreclose on the collateral in the hands of the judgment creditor, would have to be credited against the debt. This would leave the original debtor liable only to the extent of the deficiency remaining after the loan was foreclosed upon. The credit against the debt received by the lender would be equal to the highest price bid at the foreclosure sale, which might end up being its own low ball bid, but could also end up being the bid of a third party that was closer to fair market value (although probably still far below the fair market value of the collateral in practice).

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  • Can I annoy the debtor by seizing all their secured property even though I get nothing? – Dan Apr 29 at 19:43
  • The law authorizes a creditor to take that action (although in the case of a home or a personal car, it may be necessary to pay money to the debtor to cover the exemption from creditors that attaches to the asset in question). Anyone involved in the legal process is barred from acting "vexatiously" and "in good faith" but I'm not certain how Nevada operationalizes those obligation in case law and it is in any case a highly fact specific inquiry. Realistically, the debtor would probably file for bankruptcy before the judgment lien foreclosure ran its course, discharging the judgment lien. – ohwilleke Apr 29 at 19:48

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