In general, “yes”, a financial institution holding a mortgage can sue for full repayment of the loan amount outstanding on a mortgage where the debtor has defaulted. When a house is foreclosed, and sold, and the sale does not raise enough money to pay off the loan, the institution can then file for a deficiency judgment to seize other debtor assets to obtain full pay off, plus expenses. The liability of expenses being put back on to the debtor is an unexpected and new point learned here. A deficiency judgment is an expensive way to go for a mortgage holder. You, the debtor, may be held liable for fees and cost around the foreclosure and the judgment. However, the laws of each different state around these events also differ. So, as always, it is best to contact and engage an attorney who knows the rules in the state where your home and mortgage are. While the Internet will give us all types of scenarios and all kinds of results, one must try to wade through this quagmire alone. An attorney is essential.
Some of the more sensible information coming from scenarios from online contributors does center on trying to prevent your situation from getting to the default point … and beyond. When difficulty arises, discuss the situation with the holder of your mortgage. Try to work out some way to modify and continue the relationship. This does not necessarily need attorney involvement. Otherwise, at least make the “return” of the house to the bank something less than a court battle. This might be a situation that does necessarily need attorney involvement.
Another contributor had the experience where a bank wrote off the mortgage balance. The twist was that the bank then sent the debtor a 1099-MISC tax form, which is a notice of income statement, on which you will owe state, local and federal taxes, social security, and so on, and most likely, the Federal demand will be at the taxable bonus rate of 30-36 percent. Here, you would do well to consult a tax advisor before getting hit, if this is the law in your state.
Other aspect of asset seizing is the seizing of bank accounts, other assets like a car or worthwhile collectibles, and the like. Some states allow the garnishing of wages, while some states prohibit it.
Another idea put forth was to try a short sale or put up your property for sale for at least the amount you owe. As the contributor noted, the debtor will only get some small satisfaction from being out of debt, but that it will at least leave the debtor with a lot less stress.
A default on a mortgage also hits the debtor in his or her credit rating. An alert gets put on by the mortgage holder. This prevents the debtor from using the property as leverage or collateral for any other type of credit transaction.
So, to summarize some of this, if you are going to default, try to get away with something, discuss it with your mortgage holder, or sell the property to pay off the mortgage and get something out of it. At least, talk with a lawyer. A consultation is usually free.