What are the consequences of defaulting on a promissory note versus a foreclosure?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
What are the consequences of defaulting on a promissory note versus a foreclosure?
The bank has accepted our short sale offer (first and second), but they want a promissory note for $27K. We are ages 66 and 69, still employed, but trying to retire and cannot afford to pay the promissory note. Should we let our condo go to foreclosure (state of FL) or will we still be sued for the deficiency amount? What are the consequences of each alternative: promissory note versus foreclosure? Our only assets are our cars and small savings from our pension.
Asked on June 19, 2011 under Real Estate Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Florida allows what are known as "deficiency judgments." That is, if a home is foreclosed upon, after it's sold at a foreclosure sale or auction, if the proceeds of the sale (less certain administrative expenses or costs of auction) does not pay off the full remaining balance of the mortgage, the lender has the right to sue for whatever is left. These are not common, but they are something the lender can pursue.
So under either foreclosure or a promissory note, if you end up owing the bank some amount you can't pay, you could be sued. It is probably somewhat more likely to be sued on a promissory note that you default on that on a deficiency judgment, so if the amount of the deficiency--basically, the extent to which you are underwater on the mortgage--is more or less the same as the amount of the promissory note, you are probably more likely to be sued if you execute the note and default than on a deficiency judgment from a foreclosure. That said, you *could* be sued on either.
You may wish to consult with a bankruptcy attorney; another option to explore is filing for bankruptcy, either before foreclosure or after. Good luck.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.