Creditors with a secured interest in a debtor's property often consider whether to file a foreclosure action seeking a court-ordered sale of property to satisfy a mortgage debt, a law division action on a promissory note or other instrument of obligation evidencing a debt, or both. Considerations can include the creditor's seniority as it relates to their secured interest in the debtor's property as well as the debtor's unsecured assets. Some creditors pursue law division judgments and subsequently transfer those judgments to other states where the debtor has assets.
In New Jersey, claims for amounts due on a promissory note or other instrument of obligation evidencing a debt are typically not pursued in a foreclosure action. Likewise, the initiation of a mortgage foreclosure action generally does not bar a parallel or subsequent law division action.
In fact, New Jersey Court Rule 4:64-5 provides that unless the court otherwise orders on notice and for good cause shown, claims for foreclosure of mortgages shall not be joined with non-germane claims against the mortgagor or other persons liable on the debt. Only germane counterclaims and cross-claims may be pleaded in a foreclosure action without leave of court. Non-germane claims shall include, but not be limited to, claims on the instrument of obligation evidencing the mortgage debt, assumption agreements and guarantees.
Based on the foregoing, creditors often file a foreclosure action as well as a separate action to recover amounts due on a promissory note or other instrument of obligation evidencing a debt.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
