Avoid a Deficiency Judgment: Short Sale, Foreclosure Defense, or Ch. 7 Bankruptcy

Even though the real estate market in SWFL is beginning to show signs of improvement, housing prices are still nowhere near where they need to be. Floridians in particular, are familiar with the term “underwater mortgage,” which describes what many have been facing for years now, home values that are far less than the amount owed.

home underwater property guidingYou and your family purchased a home in 2005 for $200K. Like most of us, since you were a couple of dollars short of paying cash, you received financing through a bank. Unfortunately, the fair market value (FMV) for the home is now only $115K.  In this situation, your home is considered underwater because the loan amount exceeds the value.

So, what are your options? You can always wait out the market.  Who knows, in 10 years your home may be worth what you paid for it. However, you decide that that may be a bad decision as many homeowners have been laid off from work or had their hours/pay reduced; making the likelihood of effectively waiting out the market a long shot for most.

How about “trimming the fat” by selling the home and purchasing a more affordable home, or even renting temporarily? Unfortunately, the fact that the home is underwater can be prohibitive, especially in today’s market. Referring to the above example, there would still be a deficiency because the sale proceeds would be insufficient to cover the mortgage balance.

Filing for a Ch. 7 Bankruptcy could resolve this problem for you. However, filing for a BK to discharge a deficiency judgment is reactive, not proactive. If the threat of a deficiency judgment is the only reason to seek a BK, hiring a Short Sale or Foreclosure Defense Attorney beforehand could resolve the issue proactively. Many times, the threat of a deficiency judgment can be addressed and resolved through the short sale process, or a foreclosure defense attorney can usually obtain, at a minimum, a deficiency waiver which would alleviate your responsibility of paying that amount back.

If you are struggling financially and have an underwater mortgage, you should consult with a licensed Florida Attorney to discuss your options. If you would like schedule a free consultation, or have any comments or suggestions on upcoming topics, please comment below or email GuirguisLaw@gmail.com.

This is a generalized discussion and is not intended for any particular set of facts. Nothing in this article should be interpreted as creating an attorney-client relationship or attorney-client privilege. The law frequently changes and anything relied upon in this or any blog, is done so at the readers own risk.

VERNON W. GUIRGUIS, ESQ.
The Guirguis Law Firm, PLLC
1423 S.E. 16th Place, STE 204
Cape Coral, Florida 33990
239.573.9939 Telephone
239.603.6965 Facsimile

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Posted on October 24, 2012, in Legal and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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