A deficiency judgment provides a way for banks or debt collection companies to go after the difference of what a homeowner still owes after an auction or sale of the property has concluded.
Recent changes to Florida law have reduced the 5-year deadline for filing these suits down to just one year, which has caused a surge in deficiency judgment filings for 2014.
These deficiency judgment suits often seek $100,000 or more from former homeowners. Florida residents who thought their foreclosure was behind them and have begun the process of starting over are being hit with these suits and dragged back into the foreclosure nightmare.
And if judgment is ruled in favor of the Plaintiff, the collection methods can also be rather aggressive. Wages can be garnished, liens are being enforced and rights to investment properties have even been claimed in some cases.
Why has there been a sudden rise in banks and collection agencies filing deficiency judgment lawsuits?
Legislators believed that the economy was suffering as Florida residents were unsure whether or not they would be sued for a deficiency. As a result, Florida law was changed in 2014 by setting a one-year deadline to collect any unpaid debt resulting from a foreclosure.
Lenders had not typically been very aggressive in going after homeowners for deficiency judgments as those who were foreclosed on often had few resources left, if any after losing their homes. And many of these lenders were already busy litigating foreclosure suits in the courts to invest more time into the deficiencies. However, when faced with the prospect of losing the opportunity to collect on these deficiency judgments altogether, banks and lenders now had to act quickly in order to capitalize.
July 1st, 2014 became the deadline for any bank who received a foreclosure judgment in their behalf prior to June 30th, 2013 to file a deficiency judgment suit. This gave the banks little time to act on all foreclosures that occurred prior to June 30th, 2013. In order to save time and cut down on litigation and court costs, many of these deficiencies were sold to third party collection agencies, often for pennies on the dollar.
Many of these agencies have been in business for years and specialize in this type of work. They are very quick and efficient in filing the deficiency judgment suits. Here in Florida, a Texas based debt collection company called Dyck O’Neal has been responsible for filing more than 300 cases in Broward County, 200 in Miami-Dade County and over 110 in Palm Beach County – all since June 1st!
What should I do if I’ve been served with a deficiency judgment lawsuit?
Do not ignore it! It is very important you do not ignore the deficiency judgment lawsuit! The collection agencies would rather see the suit be ignored instead of having to actually fight to prove the validity of their claims in court.
If you fail to take legal action within 20 days of being served, the creditor or whoever brought the suit against you can move for a Default Judgment. Once that happens, wages can be garnished, vehicles can be repossessed, assets can be liquidated and money can be seized from bank accounts.
Although the surge in deficiency judgments is new this year, our foreclosure defense attorneys have had great success over the years with these lawsuits whenever we have had the opportunity to represent a client in their defense against them.
We generally work towards getting the entire case against the homeowner completely dismissed, and there are a number of strategies and techniques we’ve used successfully over the years to achieve this result.
There are several ways to attack the lawsuit just by testing the legal sufficiency of the complaint. And in many cases, there are issues with the service of process which can lead to an easy dismissal. For example, if a homeowner was previously served by a vague and obscure publication, it could lead to a service of process defense.
Our foreclosure defense attorneys can help find mistakes that can lead to a quick dismissal of a deficiency judgment lawsuit.
Because the banks and debt collectors are working so quickly, we’re also finding plenty of mistakes and reasons to disqualify whole lawsuits. Our attorneys have often found ourselves challenging the substantive nature of these complaints for a number of reasons.
One of the common problems we’ve seen with these lawsuits is simply due to banks discharging or writing off the deficiency amount after the foreclosure judgment was entered against a homeowner. When this happens, the banks have already received a tax credit for the deficiency by the IRS, which often invalidates any future claims they are allowed to make regarding that deficient amount.
In other cases, we’ve seen instances where deficiency waivers obtained by homeowners have been overlooked and we have helped many clients get these lawsuits dropped as a result of those waivers. Jurisdiction of the court is another challenge that can be raised in many cases.
In most cases, our attorneys have been able to defend against these deficiency judgments by settling them completely or having the amount drastically reduced.
One way we achieve this is by disputing the comps banks use during their appraisal process which is clearly one-sided. Homeowners always have the right to dispute these figures and we’ve seen plenty of reasons why these appraisals should be questioned in the first place.
There are many other ways our firm will work on your behalf to dismiss these lawsuits during the initial complaint stage of the process and beyond with more very unique and technical strategies customized for each and every specific need a client may have. We have multiple ways we can attack and defend against these suits and we find there is always plenty of room for negotiation.
Did the lender file the original note within five days after the hearing? If not, this could also be made into an issue and raised as a challenge. If a potential judgment amount was miscalculated or the bank failed to act with diligence in pursuing insurance claims to offset losses that could have reduced the amount owed, those issues could also be used as a defense.
There are also consumer protection laws in place regarding efforts to collect the debt, and whether or not they are abusive and unlawful. The Fair Debt Collection Practices Act is a good reference and guide to what debt collectors and agencies must adhere to when attempting to collect a debt.
Our attorneys also provide advice and guidance to help protect assets and rights to anyone served with a deficiency judgment lawsuit.
An attorney will also be able to provide you with advice regarding what someone is and is not allowed to do after being served with a deficiency lawsuit, along with some input and guidance to help protect assets and rights. Although any checking or savings account may be subject to wage garnishments, there are other alternatives for safely protecting assets such as a 401k, an IRA, homestead, annuities, life insurance and Florida Pre-Paid Tuition.
Remember, if you’ve been served with a lawsuit seeking a deficiency judgment claim, you have less than 20 days to act or a default judgment could be issued against you.
Call us today at 813-489-3222 to get started in defending your deficiency judgment suit right away and get a FREE consultation.
Additional Foreclosure Defense Information:
- Defending against Deficiency Judgment lawsuits resulting from foreclosures
- HB 87 and how it affects Florida homeowners facing foreclosure
- How to prepare for your consultation with a foreclosure defense attorney
- Florida Foreclosure Rates Top the Nation for 2012 – How can Fernandez Law Group help me with my Foreclosure?
- Reasons why you should hire a Foreclosure Defense Attorney
- Understanding the elements of Foreclosure Defense
- Using Bankruptcy as a form of Foreclosure Defense
- Lack of Jurisdiction and Insufficiency of Service in Foreclosure Defense
Content authored by Gaston Fernandez
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