Florida is what is called a “recourse” state. This means that after your mortgage company successfully sues you in a foreclosure action and receives a final judgment, if there is not enough money from the sale of the property to satisfy that judgment, you will be liable for the balance owed, or deficiency amounnt.
Your creditor can then collect on that deficiency amount by garnishing your wages or attaching liens to assets you own (like a car, or your bank account, for example).
Filing bankruptcy, whether a Chapter 7 or Chapter 13, is one way to stop the collection activity of your mortgage company and eliminate your liability for the debt. Once the deficiency is discharged in bankruptcy, the creditor can never collect on the debt again and if they try to do so, you can turn the tables on them by suing your mortgage company for violating the Discharge Order.
More and more of my clients are making the difficult decision to file bankruptcy as a way to deal with the problem of Florida’s recourse state status.
Some people will argue that filing bankruptcy is not necessary because rarely will a mortgage company follow up, after the foreclosure, and try to collect on the deficiency. This may be true, although I have several clients who would tell you differently.
Even if this is the case, and your lender basically leaves you alone after the foreclosure is concluded, you will still have to deal with the negative marks on your credit resulting from the deficiency amount you owe to the mortgage company showing up as an unsecured debt.
Until you either pay this debt off (not likely, nor is it the best way to be spending your cash), or file bankruptcy and get rid of the debt, you will remain negatively effected by the debt just lingering on your credit report. Not many lenders will be willing to finance your car purchase or next home purchase with a huge unsecured debt, resulting from a foreclosure lawsuit, remaining on your credit report.