The short answer is that it depends, but likely the answer is yes. If you're under water, a foreclosure by your mortgage lender would typically extinguish the lien and all junior encumbrances on the property (any second mortgages, HELOCs, etc.), but that doesn't satisfy the debt you owe to the other creditor. So while their lien on your property is gone, the debt remains unsatisfied. Thus, they can likely continue to try to collect on the debt in any number of ways, including through garnishing your wages. There are a number of facts your don't include (such as the underlying nature of the debt) that may affect the creditor's rights in pursuing payment, so you may want to talk to a consumer law attorney in your area about how to deal with the situation, especially if the creditor proceeds to garnish your wages or levy your bank account(s).
Answered on Mar 21st, 2012 at 4:02 PM