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As a follow-up to my earlier post on deficiency judgments, I wanted to discuss some elements that I did not previously cover and which I have been asked by clients. A bank/lender that obtains a deficiency judgment, also known as a judgment creditor, has many avenues to collect on its judgment. For example, it may obtain a court order directing your bank to debit funds directly from your bank accounts. The creditor may also obtain a court order directing the sheriff to seize and auction off your personal property (i.e. some automobiles, household furnishings and goods, etc.) to satisfy your debt. Further, the bank may obtain a “continuing writ of garnishment” from the court, ordering your employer to deduct money directly from your paycheck until you have paid the deficiency in full. Clients always ask if there is anything they can do to protect their assets from the bank once they obtain a deficiency judgment. There are some assets (i.e. retirement accounts, homestead, life insurance policies and annuity contracts, pension and profit sharing plans, IRAs, disability income and prepaid college plans) that are protected from creditor claims in Florida. However, even those items that are protected have limits as to the amount of protection you may have against claims of judgment creditors.

As of recent, I have found that banks are preserving their rights to pursue deficiency judgments at a later date. You should not take for granted that a deficiency will not be collected from you; many lenders may later sell their judgments to third party collection companies (or hire collection agencies themselves) for pennies on the dollar, whose sole purpose then is to aggressively try to collect money from you. Also, you should not assume that because a bank forecloses on your property and later sells it, somehow insulates you from a deficiency judgment being collected against you. That is a defense that you may raise, but one that will probably be a difficult argument to win.

My suggestion is if a bank(s) is likely to foreclose against your property, or has already initiated proceedings to do so, you should immediately consult with an experienced Florida real estate attorney, who may be able to negotiate an acceptable settlement, including a reduction in any deficiency, with your lender(s).  Just because you have been served with a foreclosure lawsuit, does not mean there is nothing that you can do. However, you should note, that the longer you wait, the more difficult it will be to either obtain a waiver of the bank’s right to seek a deficiency judgment or reduction in the amount of the deficiency. Hiring a foreclosure lawyer can assist in many ways, including arranging a short sale or a deed in lieu of foreclosure. Once a deficiency judgment has been entered, any leverage you may have had to negotiate with the lender regarding the amount owed is all but lost.

If you would like more information about this topic, please see Deficiency Judgment Counseling.  Alternatively, you may contact me, a Florida Real Estate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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