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Deficiency judgments can bite back years following foreclosure

Well, here’s a business model that an overwhelming number of people across the country would view as unprincipled and even egregiously unethical: buy up old mortgage debt for a fraction of its face value and then go after debtors for what is still allegedly owed, often years after those debtors went into foreclosure and their properties were sold by lenders.

Here is the scenario that is currently playing out for many Floridians. They took out a mortgage years ago on a home that they could ultimately no longer afford. Such was the case for millions of homeowners nationally during the so-called Great Recession.

In many of those cases, homeowners were eventually forced into foreclosure and lost their homes, with those properties being resold by lenders.

The resale price for many such homes in recent years was less than what the original debtors still owed on the properties when they went into foreclosure.

Often, those debtors believed in good faith that no legal liability would attach to them once they surrendered their homes and walked away.

To a large extent, that has been true. As noted in an article on foreclosures and deficiency judgments, going after old mortgage-related debt is “often not pursued” by lenders.

But sometimes it is, which brings up that business model referenced above. Some companies buy up that old debt and then pursue original debtors by filing deficiency judgments in court, catching them by surprise and after they thought they had regained financial traction and made a fresh start.

Reportedly, one debt collection company alone has filed more than 10,000 deficiency claims in Florida thus far in 2014.

As noted in the above-cited article, debtors are often far from helpless in responding to such filings. With assistance from a proven debt relief attorney, they can in many instances mitigate the consequences of a deficiency claim or even prevail completely against a would-be collector.

An experienced foreclosure lawyer can discuss possible defenses with a debtor and provide strong representation in any foreclosure-related claim.

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