Owing The Bank After A Foreclosure
Having a home taken away in a foreclosure can a stressful and devastating event for most homeowners. However, the stress of going through a foreclosure can be compounded when the homeowner discovers that the bank intends to go after him for a “deficiency judgment.” This means that after the bank has sold the home the proceeds do not meet the entire amount the homeowner owes, and so the bank sues to recover the difference between the debt owed and the foreclosure price.
Situations in which banks can sue for a deficiency judgment arise when the homeowner was underwater before the foreclosure, owing more to the bank than the house was worth. In some cases, the homeowner may be able to negotiate with the bank to get the bank to agree not to seek a deficiency judgment; this may happen for example, in a short sale. In a short sale, the bank agrees to let the homeowner sell the house for less than is owed on the mortgage in order to pay off a portion of the mortgage debt. In such cases, the homeowner should ensure that the short sale agreement specifically states that the bank expressly agrees not to seek a deficiency judgment.
When is a Deficiency Judgment Sought?
The bank or foreclosing party can get seek the deficiency as part of the foreclosure lawsuit if the homeowner was personally served with the court papers regarding the lawsuit. Alternatively, the bank can sue in a new and separate lawsuit specifically for the deficiency. Although the common way to determine the deficiency amount is to subtract the foreclosure price from the amount owed, according to Florida law judges have the discretion to decide what the deficiency amount should be. There are certain limitations to this judicial discretion that cap the amount a judge can award for an owner-occupied property.
Statute of Limitations
Prior to Florida passing the Florida Fair Foreclosure Act, the bank had five years to seek a deficiency judgment against a homeowner. However, after the Act’s effective date, banks have a one-year period in which to sue for a deficiency, depending on the type of property sold. If a bank is successful in getting a deficiency judgment against someone, they can seek to collect by doing things such as garnishing the person’s wages, or seeking to put a lien on other property the person may own.
Note that in some cases, a homeowner may have several other creditors owed using the home as collateral. If these creditors are not paid when the home sells, especially in a foreclosure that results in a deficiency, they can still sue the homeowner to recover for their debts. Therefore, the end of a foreclosure action does not necessarily mean that the homeowner is clear of all creditors. A homeowner with multiple liens on their home may wish to consult with an attorney as to what will happen with those liens in a foreclosure.
Consult with a Foreclosure Attorney
If you are facing foreclosure, it is important to seek an experienced foreclosure defense attorney to protect your interests. Contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation on your case.