With the current housing market in shambles, more and more people find themselves on the verge of foreclosure.  Many people find themselves in a situation where the property value is lower than it was when the property was first purchased.  This is what is referred to as an underwater mortgage, meaning that there is negative equity on your property.  So if your home is foreclosed, the proceeds from the foreclosure sale may not satisfy the entire debt of your mortgage.  In which case your lender may wish to obtain a deficiency judgment against you.
Essentially, if you get a deficiency judgment against you, you would be liable for the unpaid balance after foreclosure of the mortgage if it has failed to generate the full amount of the underlying debt.  The good news is that in Arizona there are laws that protect you, the mortgagor, from having to pay for the deficiency of your debt if you meet the following requirements.
For anti-deficiency protection the property must be two and one-half acres or less with a completed single or double family dwelling.  So if you’re in a residential area, this almost automatically applies to you.  Along with this requirement, the property must have at least occasionally been occupied by you as the owner or by another family (in case you rented the property for example).
One important thing to note is that the anti-deficiency law will not apply if the property value diminished by your own doing.  An example would be if you caused the house to flood because you did not fix a faulty water pipe.  Regardless, anti-deficiency laws can be very complicated, so you may want to consult an attorney to guide you through this process.
Stephen Trezza — Southern Arizona Bankruptcy Attorney.