Handling Post-Foreclosure Deficiencies, Collections in Florida
Many of those who have chosen not to fight a Miami foreclosure have learned the hard way that even giving up won’t be the end of their struggles.
Unfortunately, as some families find, that may be just the beginning, depending upon the way in which the foreclosure was handled. Particularly borrowers who took out more than one loan on their property, may face hounding from collection agencies, who purchased the debt from the original lender for pennies on the dollar.
All homeowners have their principal mortgage. Then some have a second mortgage and others take out a home equity line of credit.
When a lender writes off these debts, they may issue an IRS form 1099-C. This allows for a cancellation of debt. One might think that by receiving this form, his or her obligation to any further payments or liabilities on the home are absolved. This isn’t necessarily so if more than one lender is involved.
So for example, if you receive a 1099-C form from your principal mortgage lender, but not the lender for your home equity line of credit, than you would still be viewed as an active debtor. In that case, the lender for the home equity line of credit would have the right to pursue you for a deficiency judgment for whatever amount you owed – even after the foreclosure process is complete.
When you purchased your home, you agreed that you would pay back the money lent to you, and you offered up the home as collateral. While a foreclosure may cancel a first mortgage, holders of second mortgages or other lines of credit may continue the pursuit.
This is where it becomes necessary to meet with an experienced Florida foreclosure attorney.
A foreclosure doesn’t automatically create a deficiency judgment here in Florida. Instead, lenders have to comply with a number of requirements in order to seek a judgment against you after a foreclosure. If the lender fails to meet any of these requirements, it may have forfeited the right to sue you.
There could also be statute of limitations laws that limit a financial firm’s ability to pursue you for any unpaid balance. As of July 1, 2013, the period of time during which a lender can seek a deficiency judgment was slashed from five years to just one year on properties with no more than four dwelling units. That one-year statute of limitations starts at the time of the foreclosure sale.
The worst thing you can do in these cases is nothing. In fact, that’s what these lenders and debt collectors are hoping you will do. If the case goes to court, you are considered a defendant. If you offer up zero defense, more often than not, the judge will grant a default judgment in favor of the lender. With that court order, the lender and/or debt collection agency can rightfully garnish your paychecks or put liens on your property until the balance is paid.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.