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Foreclosure Process and Bankruptcy
Foreclosure is the legal process that allows the Lender
to recover the amount owed on a defaulted real estate loan by taking
ownership of the property securing the loan. In Florida,
most of the Law on Foreclosure is found in dozen or so
court cases and Florida Statute 702.01. In a
Foreclosure, the Lender begins by filing a court action
and records notice of pending law suit (Lis Pendens)
against the Borrower. If the Borrower does not respond
to the Foreclosure within twenty (20) days, by filing an
Answer, then the County Clerk can find the Borrower in
Default and ask for a final hearing. |
If the Borrower files an Answer to the Foreclosure, then
a Hearing Date is set. At the Hearing is the Lenders
Attorney, and you can present reasons for Default or
other Defenses to the Foreclosure. If you do not file an
Answer within twenty (20) days or the Judge rules
against you, then the Lenders Attorney will file a
Motion for Summary Judgment. In Florida, most
Foreclosures are decided by a Judge unless the Borrower
has a Counterclaim against the Lender, in which case a
Jury decides. The Counterclaims are tried separately
from the main Foreclosure suit. |
At the Summary Judgment Hearing in Foreclosure, the
Borrower can give testimony if present, usually, the
Judge will Order a Summary Final Judgment that shows the
amount the Borrower owes the Lender including Principal,
Interest, Attorney Fees and Court Costs. The Judge also
sets the Foreclosure Sale Date which is usually thirty
(30) days after the Summary Judgment Hearing. The Clerk
of Court issues notice of the Foreclosure Sale with the
location, date and time of the Sale.
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 The
Foreclosure Sale is usually at the County Courthouse at
11:00 A.M. The property is sold to the highest bidder.
The winning bidder must pay an immediate 5% deposit and
pay the remainder by the end of the day or a new
Foreclosure Sale will be set a minimum of twenty (20)
days later. After the Foreclosure Sale, the Clerk issues
a Certificate of Sale to the winning bidder. Within ten
(10) days of the Foreclosure Sale, the Clerk transfers
ownership to the winner if no one disputes the Sale. In
Florida, there is no Redemption Period after the
Foreclosure Sale in which the Borrower can retain
ownership of the property. This Foreclosure process
usually takes three (3) to five (5) months. Roughly 1/3
to ½ of all residential properties in Foreclosure are
sold at auction. After the Foreclosure process is
completed then the Lender usually seeks Eviction of the
Borrower or Tenant within seven (7) to twenty one (21)
days.
If the winning bidder pays more than the Mortgage on the
property, the difference minus legal costs goes to the
Borrower. Many times the Bank will simply bid the amount
of the Lien on the property and take ownership. If the
bidder pays less than the Mortgage, then there is a
Deficiency owed on the Mortgage and the Lender may bring
an additional Law Suit to recover the Deficiency. The
Deficiency Suit must be brought within four (4) years
after the Foreclosure Sale. |
 The
Foreclosure can end if (1) the Borrower reinstates the
loan by paying off the Default amount during the grace
period , known as pre foreclosure, (2) the Borrower
sells the property to a third party during the pre
foreclosure phase, (3) a third party buys the property
at auction at the end of the pre foreclosure period, or
(4) the Lender takes ownership of the property, usually
with the intent to resell it on the open market. Such
property, owned by the Bank is known as Bank owned or
REO properties (real estate owned by the Lender).
There are various methods to stop a Foreclosure, most of
which are discussed in other sections of this website.
The Borrower can file a Chapter 13 Bankruptcy which will
stop the Foreclosure and allow the Borrower to pay any
missed payments over a 36-60 month period. The Borrower
can also negotiate a Deed in Lieu of Foreclosure (you
deed the property to the Lender in lieu or in place of a
Foreclosure) with the Lender. This usually requires
completing a large financial package. In a Deed in Lieu,
there cannot be any additional liens or mortgages on the
property. The Lender will usually waive its right to a
Deficiency Judgment.
Some Lenders will agree to a Short Sale or Short
Mortgage Payoff, in which a third party will pay less
than the full mortgage balance to purchase the property.
The Lenders consent is required for a Short Sale because
the mortgage is not paid in full, and the Lender can
pursue a Deficiency Judgment. In a Short Sale, there can
also be tax consequences because the Lender is forgiving
debt.
Third, some Lenders will agree to Loan Modification,
lowering interest rates, freezing interest rate
increases, or extending the term of the mortgage. There
are usually fees associated with a Loan Modification but
they are usually much less than the costs of
Refinancing.
Our affiliate company,
Julian Credit Management (www.JulianCredit.com) is a
Credit Counseling Organization and offers:
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Debt Consolidation |
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Credit Counseling
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Credit Repair
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Mortgages Loans
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Settlements
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Refinancing |
Finally, the Lender may agree to a Forbearance whereby
the Borrower pays the defaulted mortgage payments over a
three (3) to six (6) month period along with the regular
mortgage payment. If the Borrower had a prior
Forbearance, he is probably disqualified from obtaining
a second Forbearance.
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Jay Matthew Weller, Attorney at Law
Bankruptcy Attorneys
Tampa Bay Florida
and Debt Consolidation Legal Services
Florida Law Firm with Offices in
Tampa Clearwater (Headquarters) Lakeland Port Richey
Phone: 1-800-407-3328 (DEBT)
www.jayweller.com
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