After a foreclosure, you may be surprised to find that the nightmare is far from over, but if your mortgage lender is unable to recover their entire loan balance after a foreclosure sale, you’re still very much along for the ride.
A deficiency occurs when a mortgage lending institution is unable to cover its investment with the proceeds from the sale of a foreclosed home. In the state of Florida, your lender can file suit against you in order to collect the difference. If you paid for private mortgage insurance (PMI), the insurance company will pay off the deficiency to the bank; but the PMI company has a right to hold you accountable and seek repayment. Don’t panic! Deficiency laws are complex and generally do not allow lenders or related parties to flippantly pursue borrowers to cover their losses once a foreclosure’s taken place.
Florida’s statute of limitations for deficiency judgments resulting from foreclosures on or after July 1, 2013 is one year, beginning the very day your home is sold in foreclosure and the new owner is issued a certificate of title. Nevertheless, sitting back and ignoring a deficiency may only make things worse and even result in garnished wages; so do consider your options! Deficiency judgments are unsecured debt, therefore filing chapter 7 (or chapter 13) bankruptcy can eliminate your personal liability to repay them. Before making any final decisions however, you should consult with a bankruptcy attorney to assess your unique financial situation and determine whether filing bankruptcy is the best course of action for you.
Stephen K. Hachey, a Florida real estate attorney, can help you navigate this process and make the most of a difficult situation. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.