What You Need to Know About Deficiency Judgments

 Many debtors may think they’ve successfully navigated their debt problems once a lender forecloses on their property. Unfortunately, this is not always the case. Creditors often continue attempts to collect on an estate the debtor no longer owns through the pursuit of deficiency judgments.

Deficiency judgments are legal orders for debtors to pay off their loan balance after repossession or foreclosure occurs. Once a lender takes the property and sells it, these sale proceeds pay off the existing debt and any additional fees related to the collections process.

However, when the property doesn’t sell for a high enough price to satisfy the entire debt, the debtor may still owe money. This remaining amount is what we call a deficiency. 

A deficiency judgment from a court makes the debtor personally liable for the deficient balance.

As a result, lenders and debt collectors may continue to collect the amount due on the outstanding balance.

What Happens After a Successful Deficiency Judgment

When a lender successfully obtains a deficiency judgment against a debtor, they become personally liable for the total judgment amount. They remain legally obligated to pay back the lender.

If the debtor cannot pay, the collector may try to collect utilizing various other methods.

In some scenarios, a lender won’t do anything at all. Instead, they’ll turn the account over to a collections firm, allowing the debt collector to pursue the outstanding debt.

After a successful pursuit of deficiency judgments, lenders will take specific steps to collect. These may include:

• Wage Garnishment – Docking a portion of pay until the debtor satisfies the debt.
• Levying Accounts – Taking cash from bank accounts to reduce the overall debt amount.
• Contacting the Debtor to Request Repayment – Debt collectors are often persistent, as well as persuasive. When a debtor doesn’t intend to pay or communicate with their collectors, they may submit a request to stop contact. Nonetheless, this won’t prevent them from enlisting an attorney for legal action.

Deficiency Judgments After Foreclosure

Creditors may opt for either judicial or non-judicial forms of foreclosure. The most common type of collection on a deficiency judgment is the non-judicial way creditors begin the foreclosure procedures without seeking court orders.

In this situation, a skilled creditor attorney remains necessary to understand the specifics of the case to file a lawsuit and pursue the deficiency. 

The state of Florida considers every foreclosure proceeding judicial. Banks and creditors must go through the state court to foreclose on a property. The judge will typically determine the deficiency amount. 

However, the judgment cannot exceed the difference between the overall money judgment amount and the home’s fair market value at the date of sale.

The statute of limitations on deficiency judgments for residential properties in Florida is only one year. The legislative act begins on the first day after a court clerk issues the certificate of title to whoever purchased the home at a foreclosure sale. 

Generally, if no one files an objection to the sale, this will take place about ten days after purchase.

Seeking Legal Assistance

Litigation concerning deficiency judgments was rampant during the financial crisis of 2009. This was primarily due to numerous homeowners in Florida finding themselves owing more on their properties than the market value itself.

Deficiency judgments are rare in favorable economic times. Lenders and banks will underwrite loans with value ratios in place to cover the difference if a foreclosure takes place.

As the economy worsens, real estate value in Florida will naturally decline. When homeowners get “upside down” on their properties, this leads to an increase in defaulting property-holders.

Pursuit of Deficiency Judgments Fort Lauderdale | The Law Offices of Paul A. Humbert, P.L.

Our firm works hard to assist creditors in reclaiming their debts to pursue deficiency judgments. Believe it or not, but when debtors owe on a loan, the creditor still can recover their property.

With an extensive amount of experience in foreclosure and deficiency judgments, the Law Offices of Paul A. Humbert, P.L. remain the ideal solution to help lenders and creditors successfully pursue their debts.

We help these creditors analyze property values by working with trained experts. The analysis and information help determine an appropriate amount of sale and deficiency in any foreclosure situation, including the pursuit of deficiency judgments. 

To learn more about how our firm can help you with your debt, contact our creditor defense and foreclosure attorneys at (786) 373-3757 today!

1.  “The Difference Between a Judicial and Nonjudicial … – Nolo.” https://www.nolo.com/legal-encyclopedia/the-difference-between-a-judicial-and-nonjudicial-foreclosure.html. Accessed 14 Aug. 2020.