Foreclosure is the system by which a party who has loaned money secured by a mortgage or deed of trust on real property (or has an unpaid judgment), requires sale of the real property to recover the money due, unpaid interest, plus the costs of foreclosure, when the property owner fails to make mortgage payments. After the payments on the promissory note (which is evidence of the loan) have become delinquent for several months (time varies from state to state), the lender can have a notice of default served on the property owner (borrower) stating the amount due and the amount necessary to "cure" the default. If the delinquency and costs of foreclosure are not paid within a specified period, then the lender (or the trustee in states using deeds of trust) will set a foreclosure date, after which the property may be sold at public sale. A Foreclosure Sale can be stayed (stopped) if the property owner files for a Chapter 7 or Chapter 13 Bankruptcy. Up to the time of foreclosure sale (or even afterwards in some states) the defaulting borrower can pay all delinquencies and costs (which are then greater due to foreclosure costs) and "redeem" the property. Upon sale of the property the amount due is paid to the creditor (lender or owner of the judgment) and the remainder of the money received from the sale, if any, is paid to the lender. There is also judicial foreclosure in which the lender can bring suit for foreclosure against the defaulting borrower for the delinquency and force a sale. This is used in several states with the mortgage system or in deed of trust states when it appears that the amount due is greater than the equity value of the real property, and the lender wishes to get a deficiency judgment for the amount still due after sale. This is not necessary in those states which give deficiency judgments without filing a lawsuit when the foreclosure is upon the mortgage or deed of trust.

In Florida, mortgages must be foreclosed by filing a lawsuit in court. As in any lawsuit, the borrower must be served with notice of the lawsuit and must be given an opportunity to appear and defend his or her rights. The lender will try to show that the borrower is in default, and that foreclosure is therefore necessary under Florida equity law. Florida is unusual in that the legislature has passed very few statues regulating foreclosures. Most of the law on the subject of foreclosures in Florida is found scattered in dozens of cases. The basic statue, chapter 702.01 reads as follows:

All mortgages shall be foreclosed in equity. In a mortgage foreclosure . . .

action, the court shall server for separate trial all counterclaims against the foreclosing mortgage. The foreclosure claim shall, if tried be tried to the court without a jury.

Counterclaims by a borrower may be tried to a jury, but they must be tried separately from the main foreclosure lawsuit.

In Florida because the lawsuit to foreclose on a borrower is a suit in equity, it is impossible to obtain an injunction to stop what is, in essence, a court ordered sale. In addition, the court can order the sale at a low price. A sale can be set aside if there is an error in the procedure to foreclose; however, it cannot be set aside due to the low sale price. The court order commanding foreclosure will specify how the foreclosure must take place, and the foreclosure must take place on those terms.

After the sale takes place, the sale terms must be confirmed by the court that ordered the sale. If the terms of the sale order are met, title in the buyer''s name can become complete by filing a certificate of title. At the discretion of the court, junior lien holders can redeem the property, up to the time of the confirmation of the sale. The equity of redemption is cut off when the sale is confirmed, but it exists prior to that time, which means the borrower can save the property from foreclosure by coming up with the money before confirmation.

If the creditor who is foreclosing on the property does not get sufficient money from the foreclosure sale to pay the amounts owed in full, the creditor can file a separate lawsuit against the property owner the deficiency. An action for deficiency must be filed within four years after the foreclosure sale. However, any deficiency judgment can be discharged in a Chapter 7 Bankruptcy if you do choose to do so.