Deficiency Judgement on a Credit Report

A deficiency judgment due to a short sale (or a judgment for any reason) stays on your credit for seven years or until the governing statute of limitations (SOL) expires. The SOL on judgments can run from 10 to 20 years. From the Fair Credit Reporting Act:

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c]

(a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information: ….

(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.

Whenever possible a seller negotiating a short sale with their lender should require that the lender accept the reduced payoff as ‘Payment-in-Full’ and waive their rights to any deficiency judgement.