Deficiency Judgment Information
After a foreclosure sale, if the sale proceeds are insufficient to pay the outstanding mortgage balance, the lender may seek a deficiency judgment for the shortfall. For example, if the borrower owes $300,000 on the mortgage and the property sells at foreclosure for $200,000, the deficiency is $100,000. A deficiency judgment allows the lender to: garnish the borrower's wages, levy on the borrower's bank accounts, place liens on the borrower's other property, and pursue other collection remedies. However, deficiency judgments may be uncollectible if the borrower: has no non-exempt assets, files for bankruptcy, or is protected by the homestead exemption for their primary residence.
Florida Legal Definition
Deficiency judgments in Florida are governed by Florida Statutes §702.06. The lender must file a motion for deficiency judgment within one year after the foreclosure sale. Under §702.06, the court must determine the fair market value of the property at the time of the foreclosure sale. If the fair market value exceeds the judgment amount, no deficiency may be entered (this protects borrowers from deficiencies caused by below-market foreclosure sales). The deficiency amount is: the outstanding mortgage balance minus the fair market value of the property (not the actual sale price). Florida's homestead exemption protects the borrower's primary residence from the deficiency judgment lien, and Florida's wage garnishment limitations (§222.11) limit the amount that can be garnished.
How It's Used in Practice
In practice, attorneys handle deficiency judgments for both lenders and borrowers. For lenders, the attorney files the deficiency motion within the one-year deadline, retains an appraiser to establish the fair market value of the foreclosed property, and pursues collection of the deficiency judgment against the borrower's non-exempt assets. For borrowers, the attorney defends against deficiency claims by: challenging the property's fair market value (arguing that the value exceeds the judgment, eliminating the deficiency), asserting the homestead exemption (protecting the borrower's primary residence), invoking wage garnishment limitations, evaluating bankruptcy options (which may discharge the deficiency), and negotiating a settlement (a reduced payment to satisfy the deficiency). Many borrowers are effectively judgment-proof after foreclosure.
Key Takeaways
- Deficiency judgments allow lenders to pursue borrowers for foreclosure shortfalls.
- Must be filed within 1 year of foreclosure sale (§702.06).
- Based on fair market value, not the foreclosure sale price.
- Homestead exemption protects borrower's primary residence from the judgment.
- Many post-foreclosure borrowers are judgment-proof.
Disclaimer: The information and opinions provided are for general educational, informational or entertainment purposes only and should not be construed as legal advice or a substitute for consultation with a qualified attorney. Any information that you read does not create an attorney–client relationship with Barnes Walker, Goethe, Perron, Shea & Johnson, PLLC, or any of its attorneys. Because laws, regulations, and court interpretations may change over time, the definitions and explanations provided here may not reflect the most current legal standards. The application of law varies depending on your particular facts and jurisdiction. For advice regarding your specific situation, please contact one of our Florida attorneys for personalized guidance.
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