What Are Deficiency Judgments?

Florida has one of the highest rates of foreclosure in the nation. In addition, they are one of only a few other states that have a law stating that if the mortgage balance is higher than the value of the property, the financial institution holding the mortgage can continue to pursue the money owed. When this occurs, the financial institution will seek a deficiency judgment. If awarded, they will be able to pursue what is owed for as much as 20 years, and the debt even carries over after the death of the person foreclosed upon. Needless to say, it is important to avoid a deficiency judgment if at all possible, and that is one of the many things Reyes Law Group attempts to do for our clients.

Statute of Limitations

After a foreclosure has occurred, interested parties only have one year to file for a deficiency judgment. Prior to July 1st, 2013, the length of time allowed was five years, which could result in people getting blindsided with this type of lawsuit long after they thought they had put their foreclosure behind them. The one year statute of limitations was determined to be much more reasonable, and now allows all parties involved to plan for the future effectively.

Who Can File for a Deficiency Judgment?

In the vast majority of cases, the primary mortgage holder will be the party that files for a deficiency judgment. Other parties with liens, such as second mortgages and home equity lines of credit, however, also have the right to file to collect what they are owed.

Deed in Lieu & Short Sales

When people know that they will be unable to make their mortgage payments, they often work with the mortgage company to find a solution that helps them avoid foreclosure. Two of the most common options are known as deed in lieu and short sales. In each of these options, the property owner and the mortgage company agree to either sell the property for less than is owed, or give the deed to the mortgage company and leave the house without going through the foreclosure process.

Many people mistakenly believe that when they use one of these processes, they are able to exit the property free and clear (with the exception of some dings on their credit report). The fact is, however, is that mortgage companies can still seek a deficiency judgment after either of these options, so the homeowner may still be required to repay a significant amount of money.

Don’t Handle Your Foreclosure Alone

While deficiency judgments aren’t uncommon, they do not always get granted by the courts, even if the money is owed. Courts tend to understand that people who have gone through a foreclosure (or deed in lieu or short sale) are already having financial difficulties. Because of this, they may not grant the deficiency judgment that was requested. The best way to protect yourself from an unwanted judgment in these cases is to have an attorney by your side to fight for your rights. Contact Reyes Law Group to ensure your foreclosure is handled properly, and avoid the risk of a deficiency judgment.

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Written by Reyes Law Group