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Deficiency judgments and what you need to know

Deficiency Judgement
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Homeowners mistakenly assume that once the bank has foreclosed, sold the home in a short sale, or accepted a deed-in-lieu of foreclosure, that all their troubles with the bank will disappear. However, if the bank has not recovered the entire balance that remains on the mortgage loan once any of these measures have been taken, they can pursue to file a claim for a deficiency judgment.

If you are currently in the foreclosure process or at risk of a deficiency judgment, it’s important to stay abreast of the most recent changes to deficiency judgment laws and to be well informed of exactly what the bank can do in order to collect.

What is the timeframe in which the bank can pursue a deficiency judgment?

In Florida, the lender has one year to seek a deficiency judgment from the date of the foreclosure sale completion. This law has been in effect since July 1, 2013; thus any short sale, foreclosure, and deed lieu since this date is restricted by the one-year rule.

Prior to this change in the law, lenders were given a five-year period in which to file a claim for a deficiency judgment.

The lenders are interested in recovering as much of the debt as possible, and if the difference between what they were able to collect and the amount owed is great, then there is a high possibility that they will file the claim within their allowed time frame. If this occurs, it is in your best interest to speak with a Miami foreclosure attorney. If the lender obtains a judgment in their favor, they have several means of collecting on the debt.

What can a lender do to collect on a deficiency judgment?

Once the lender has received a judgment from the court allowing them to collect the deficiency, the lender has the ability to garnish wages if the debtor is uncooperative with repaying the debt. This will not only set you back financially, but it can also be embarrassing to have the lender speak with your supervisor regarding your debt.

If you receive a notice that the lender is filing for a deficiency judgment do not ignore it and have a Miami foreclosure attorney represent you. An attorney may be able to prove that the deficiency amount the lender is claiming is inaccurate, amongst other arguments that could lower or eliminate the amount you will owe to the bank.

Of course, the best scenario is to avoid the deficiency judgment altogether by having an attorney review the documents in association with the sale or deed-in-lieu of the home. An attorney will negotiate that a stipulation be included stating that the lender will not pursue a deficiency judgment.

What to do if you cannot afford payments on the deficiency judgment?

Lets say that you were unable to avoid a deficiency judgment against you, at this point there are very few options available. If you can prove financial hardship, you may qualify for a head of household exemption. Alternatively, you may be able to file bankruptcy.

As stated above, the best way to deal with foreclosure is to prevent it. However, there are circumstances in which the foreclosure is accelerated and it becomes unavoidable. At any stage of foreclosure it’s advisable to speak with a Miami foreclosure attorney.

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