Your Guide to Deficiency Judgments After Foreclosure
If you’re going through the process of losing your home to a foreclosure, it’s easy to think that your mortgage debt will disappear. However, depending on how much money you owe, leaving your foreclosure in the past and rebuilding your current finances and credit might not be an option for you. In the case that your mortgage lender sells your house as a foreclosure and receives less money than what you still currently owe on your loan, you could still owe them money. In this case, a deficiency judgment can be issued against you in a legal process.
Thus, the only certain way to be “debt-free” after a foreclosure is if the house sells for the total amount that you owe on your mortgage loan.
What is a Deficiency Judgment?
To break this down further, the process of foreclosure occurs when a person stops making payments towards their mortgage loan.
In this instance, the lender has the right to take over full ownership of the unpaid home. They will then try to sell that same house and utilize the profits to pay your debt off. However, if a home is sold for less money than what a person currently owes on the foreclosed house, the lender’s loss is referred to as a deficiency.
In the case of a deficiency, the local courthouse may issue a deficiency judgment against the borrower. For this to occur, a lawsuit may or may not be required depending on the state of residence.
This deficiency judgment allows lenders to pursue and collect the money still owed after the home sale. Not all lenders will pursue a deficiency judgment, but it is certainly a possibility.
What Happens in the Case of a Foreclosure Deficiency?
In the instance that your lender pursues a deficiency judgment against you, you may be wondering what happens next. After all, if you couldn’t make your mortgage payments prior to your foreclosure, it may be difficult to pay off what you still owe.
When this happens, either the lender or a debt collector will take the necessary steps to collect their allotment. These could include direct requests, putting liens on owned items often excluding essential items like homes and vehicles, garnishing your paycheck wages, and even levying your bank accounts.
How Long Do Deficiency Judgments Last?
The time that your deficiency judgment lasts often varies depending on the state that the foreclosure deficiency took place. For example, six states forbid deficiency judgments entirely: California, Montana, Oregon, Minnesota, Alaska, and Washington.
However, other states like Maryland allow up to 12 years to collect payment. Florida deficiency judgments are allotted for up to 20 years. Additionally, Florida has a statute of limitations that lasts for one year. That means for up to a year after your property was foreclosed, a lender can pursue a deficiency judgment in court.
Schedule a Free Confidential Consultation Today
The process of a house foreclosure is certainly stressful. Instead of going through the motions alone and without advising, an experienced lawyer can help walk you through it. In Florida, our Foreclosure Defense Law Firm can act as your guide through foreclosure and deficiency judgments.
With over 30 years of combined experience, our knowledgeable Florida foreclosure defense attorneys will ensure you take all the necessary steps and precautions through the duration of your deficiency judgment procurement. Contact the Foreclosure Defense Group today for a free consultation and to discuss your potential options throughout your foreclosure.