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Deficiency is the amount an individual owes to the lender after a foreclosure, if the property was sold for less of the balance owed to the lender. For example, you owed $500,000, when the foreclosure took place, the lender was only able to obtain $300,000; the difference of $200,000 is the deficiency, which becomes a personal debt charged to you. The foreclosure does not eliminate the borrower responsibility for the loan, and it’s becoming more common that third party companies purchase the right to sue you for a foreclosure deficiency.

Deficiency Judgment: is a judgement against a borrower, for the unpaid money after the foreclosure, if the lender decides to file a petition. Because in Florida foreclosure is judicial, the lender has to go through the state court to file monetary judgement against the borrower. The lender may seek deficiency judgement within a year after the transfer of the deed to the new owner after the foreclosure.

The judge determines the amount of the deficiency judgment, but it can not exceed the difference between the judgement amount and the fair market value at time of the sale. After the lenders sues, if you don’t challenge the claim, the lender could garnish your wages or go after your assets to get paid. Also, deficiency judgements accumulate interest at the post-rate judgement rate of 6%.

Filing bankruptcy after a foreclosure sale or during the deficiency judgement litigation allows you to either eliminate the deficiency all together or pay it over time and not risk losing assets or being garnished.

Bankruptcy could be an option, for you to stop the personal liability of the deficiency judgement. In most cases deficiency judgement is treated as unsecured debt, which could be discharged when declaring Chapter 7, or most likely included on a repayment plan when declaring Chapter 13 bankruptcy. Call us today, if you need an attorney to review your case and find the options you have.