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Florida residents going through financial crises due to bankruptcy or foreclosure may be dealing with an unpleasant aftereffect known as a deficiency judgment. In Florida, when foreclosure occurs, the state courts grant the judicial filing. However, often more money is owed on the property than the lender is able to recoup, after factoring in the fees and costs. What remains is known as a deficiency, and the lender may choose to pursue the former homeowner for the amount.

Florida law does not prohibit deficiency judgments after short sales, so homeowners who may feel they are walking away free and clear of the debt can be in for a rude awakening if the lender continues to pursue it. This occurs most often when the discrepancy between what the property sells for and what is actually owed is large.

Back in July of 2013, the Florida legislature passed House Bill 87, which reduced the length of time the lender had to pursue a deficiency judgment from five years to only one year. This applies to residential properties that have no more than four units. The clock starts ticking once the foreclosure sale is done. According to the law, the lender or mortgage holder must prove that he or she is legally able to foreclose by producing to the court the original note of the mortgage or else a clear endorsement chain.

If you are being pursued to pay a deficiency judgment, it is best to seek legal representation immediately to preserve your options, which may include invalidating the debt if the lenders are unable to produce the original mortgage documents or a clear chain of endorsements. Sometimes an attorney can negotiate a lower settlement you are better able to afford or help devise a repayment plan over time.

Source: loansafe.org, “How to defend against a foreclosure deficiency judgement in Florida” Moe Bedard, Jun. 04, 2014