“Can you file bankruptcy to avoid deficiency judgment from a foreclosure in Fl?” Florida (Fl) is recourse state which means that a lender can pursue a deficiency judgment against you for payment deficiency. However, you can file a bankruptcy in order to either avoid or wipe out the deficiency judgment.

Bankruptcy to avoid deficiency judgment

If you think that you are going to get sued by your lender for missing your mortgage payments, if you think that you are in dire financial condition, you can file bankruptcy to avoid deficiency judgment. It is better to consult an attorney to get better advice on such matters. You can ask a bankruptcy lawyer if you can you file bankruptcy to avoid deficiency judgment from a foreclosure in Fl.

A deficiency judgment is the judgment that a lender files against you, the borrower because of the deficiency between the value of the foreclosed property and the outstanding home loan balance and the other costs associated along with the attorney fees. In Florida, not all of the mortgage foreclosures lead to a deficiency judgment. However, as per the foreclosure laws in Florida, the lender can pursue the deficiency judgment against the debtor for 5 years.

However, bankruptcy should be your last option to avoid the deficiency judgment as it hurts your credit. You should wait till the foreclosure process on your property is complete and then if required you can file bankruptcy preemptively in order to avoid the deficiency action that is likely to occur. You should always consult an attorney if you decide to file bankruptcy.

Bankruptcy once filed can stay on your credit report for 7 to 10 years depending on the chapter under which you have filed your bankruptcy. Thus, it is important to consult a bankruptcy attorney before filing bankruptcy. You can talk to him extensively about the state of your finances and the deficiency judgment impending on you. He will help you to file the bankruptcy under the right chapter.

So, what happens when you file bankruptcy? If a mortgage lender has already filed lawsuit against you seeking deficiency judgment, but hasn’t yet obtained any order for granting the judgment when you had filed bankruptcy, the mortgage debt will be treated as unsecured one.  In addition, the automatic stay comes into effect and the lender will have to dismiss the lawsuit against the debtor.