Florida Deficiency Judgment Laws

• Lenders are able to pursue deficiency judgments against homeowners in Florida.home sweet home image by David Dorner from Fotolia.com
  
  Deficiency judgments occur when a lender ends up auctioning a foreclosed property for less than the value of the mortgage note. In this situation, the lender may pursue a deficiency judgment against the homeowner. Florida law allows for deficiency judgments against homeowners and requires the lender to file a separate lawsuit to seek the deficiency upon completion of the foreclosure process.
  
  

Assets Exempted and Time Period to Collect

• Florida allows for deficiency judgments under Section 702.06 of the Florida statutes. Lenders are able to pursue bank accounts, wages and to place liens on property, However, the law exempts retirements accounts such as IRA, 401(k) plans and social security income. In addition, workers' compensation payments and unemployment benefits are exempted. Lenders have 20 years to collect the judgment, and interest accrues throughout the period the judgment remains unpaid.
  
  

Treatment of Wages

• Florida only protects extremely low income families from garnishment for a deficiency judgement. If the head of family's net wages are less than or equal to $500 a week, such wages cannot be garnished unless you have specifically signed an agreement allowing a lender to garnish wages. For incomes above $500 a week, federal law limits the amount of garnishment up to 25 percent of net wages, or up to 30 times the minimum wage, whichever is less.
  
  

Applicability of Homestead and Other Exemptions

• Homestead properties are not protected from any deficiency judgments which may occur due to mortgage liens. A distinction applies to lender who have financed or made improvements to the homestead. In these secured loans, the home is the security. The Homestead Act in Florida protects the homestead from unsecured debts, or debts which are not specifically collateralized with the home.
  
  

Best Alternatives

• The best option to avoid a deficiency judgment is to talk to the lender and see if there is an alternative short of foreclosure. Deed-in-lieu, where the borrower signs the house over to the bank, or a short sale, where the bank accepts a sale of the house for less than the face value of the note, are both ways to relieve the homeowner of the house and give the bank possession or partial compensation.