This depends in part on whether the property in the short sale is located in a judicial or a non-judicial foreclosure jurisdiction.

In non-judicial foreclosure, also called a mortgage walk-away trustee sale, when a lender forecloses on your property or agrees to a short sale of the home, the lender cannot later come after you personally for their financial losses, with exceptions in some states for borrowers who have significant other assets.

In judicial foreclosure states, lenders go to court and argue to a judge why they should be allowed to foreclose on the property. The lender files a complaint and a notice called a Lis Pendens, which details how much the debt is for and why the lender should be allowed to foreclose and take the property given as security for the loan.

If the court agrees with the lender and grants the judicial foreclosure, it will issue a judgment against the borrower for the total amount owed on the mortgage, including the costs of going through the judicial foreclosure process.

Some states permit lenders to choose whether they want to proceed with judicial or non-judicial foreclosure proceedings.

However, many states limit the rights of lenders to foreclose on a property and seek a personal judgment against the borrower through what are commonly called “One Action Rules.” The rules mean creditors may take only one action for the recovery of debt and may not both foreclose on a property and hold the borrower personally responsible for losses incurred in a foreclosure or short sale.

In states with One Action Rules for foreclosure and short sale proceedings, the rules work in conjunction with state deficiency-judgment statutes to bar or limit a creditor’s rights to recover the balance of proceeds from the sale of real property where the funds paid were insufficient to cover the total debt.

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