Florida homeowners on the verge of financial turmoil may assume that foreclosure is inevitable or the only solution to get rid of unmanageable debt. However, homeowners may not realize that there are financial consequences when letting a home go into foreclosure, and in some cases, bankruptcy protection may be more helpful and beneficial for struggling homeowners. One South Florida resident is learning the hard way that foreclosure does not always mean an end to one’s financial troubles.
The now unemployed handyman used to be the owner of a home once valued at more than $500,000 in South Florida. The ocean was merely steps away from his house. However, the man refinanced his home before the housing market crashed in order to help take care of his late mother who suffered from Alzheimer’s. Since then, his house lost hundreds of thousands of dollars in value and he found himself unemployed. The man let his house go into foreclosure after he could no longer manage to pay his mortgage and other living expenses. He now lives in a one-bedroom trailer in a mobile home park in Florida.
With no car and no full-time job, the man is now considering filing bankruptcy because he is struggling to pay his rent and electric bill. The man was also recently notified that he still owes the bank $151,461 for his beach home that was lost to foreclosure. But how can he be required to owe a balance on his home that was taken over by the bank?
The bank that held the man’s mortgage filed a deficiency judgment against him. Although it is rare for a bank to file a deficiency judgment, it is not a hollow threat when one is filed. We will continue this discussion next week, focusing on what a deficiency judgment is and why banks may be attempting to go after former homeowners in order to collect on debts left over from foreclosures.
The Palm Beach Post: “Foreclosures’ hidden risk: Debt that haunts for two decades,” Kimberly Miller and Christine Stapleton, 28 Mar. 2011