A recent article in the California Law Review Online declared that, “The coronavirus pandemic is set to metastasize into a debt collection pandemic. This is because while evictions, foreclosures and student loan payments have been stayed by various government  orders and federal regulations, there is no blanket moratorium or order stopping debt collection lawsuits. Many debt collection law firms have ramped up credit card collections lawsuits since they have not been able to bring or finish foreclosure lawsuits. Many credit card collection lawsuits end up with the consumer getting a default judgment entered against them, since they believe there is nothing that they can do to stop these lawsuits. Debt collection law firms nationwide kept filing new cases during the shutdown, consumers be damned. For example, in Maryland, two major debt collectors alone filed over 2,000 suits in April.  These law firms must keep their gravy train rolling, even if many Americans have lost their jobs or part of their income, through no fault of their own.

After a homeowner gets a judgment against him or her, the law firm will usually attempt to get paid–voluntarily at first, and then by using court process to take the homeowner’s income and assets. There are several ways in Florida that a judgment creditor can collect on a judgment.

In order to bring your mortgage current through Bankruptcy, you must first file a Chapter 13 Bankruptcy even if you qualify for a Chapter 7 Bankruptcy. A Chapter 13 Bankruptcy is a reorganization of your debts through a 60 month payment plan; referred to as a Chapter 13 Plan. Based on your income and family size, you make payments to a trustee. The trustee then distributes these monthly payments proportionally to your creditors. Whichever debts have not been paid off at the end of the 60 months are discharged. 

Bringing your mortgage current through Bankruptcy in Jacksonville, FL requires you to start making your regular monthly mortgage payment through your Chapter 13 Plan. Not only do you have to immediately start paying your normal mortgage payment again, you also have to pay a portion of your past due payments each month.

For example, before falling behind on your mortgage, your payments were $1,200.00 per month. You are now 15 months behind on your mortgage payments at the time you file a Chapter 13 Bankruptcy to bring your mortgage current. Your Chapter 13 Plan would require you to pay your $1,200.00 mortgage payment plus an additional $300.00 in arrears. Your Chapter 13 Plan will also include a trustee fee and an additional amount to your unsecured creditors based on your monthly income and family size.

Your income and how far behind you are on your mortgage payments will determine if bringing your mortgage current through bankruptcy in Jacksonville, FL is actually an affordable option for you. While a Chapter 13 Bankruptcy does give you the option to bring your mortgage current, it can be very difficult and not always an affordable option. If you are extremely far behind on your mortgage payments, your Chapter 13 Plan Payments might be too much for you to afford.

For example, prior to filing a Chapter 13 Bankruptcy, your mortgage payments were $1,200.00, but you were 36 payments behind. Your Chapter 13 Plan would include your $1,200.00 mortgage payment and $720.00 in arrears. Your Chapter 13 Plan would be almost $2,000.00 prior to adding the trustee’s fees and any other additional amount required by your income and family size. Potentially making your Chapter 13 Plan unaffordable.

This is why I always stress to my clients the importance of trying every other option to save their home when they are behind on their mortgage before turning to bankruptcy. Contact the Law Office of David M. Goldman, PLLC today to speak with an attorney who can help you go through all options and help you pick the best option to save your home and bring your mortgage current.

However, don’t get too worried just yet if you have not owned your homestead for 1,215 days. You can still take advantage of the Florida Homestead Exemption and protect up to $125,000 of the equity in your home per Debtor. That means that a couple can still protect up to $250,000 of the equity in their home when filing bankruptcy together, which is still pretty awesome!

But what happens when you file a Chapter 7 Bankruptcy with other real property that is not your homestead? Can that property be protected? How the property is treated will completely depend on whether or not the property is mortgaged and/or if there is any equity in the property. If the property is encumbered by a mortgage and there is no equity in the property, then you should be able to simply continue making those normal monthly mortgage payments, and the bankruptcy should not have any effect on the property whatsoever. However, if there is any equity in the property, then the Trustee will most likely take possession of the property and sell it in order to reach the available equity. Unfortunately, there is no exemption available to protect real property that is not your homestead.

There are 2 ways in which the deed of your surrendered home can be transferred out of your name. The first is for your mortgage holder to agree to a deed-in-lieu of foreclosure. A deed-in-lieu of foreclosure is where the bank agrees to take back possession of the home and you simply sign the deed over to your mortgage holder and provide them with the keys. In order to get a deed-in-lieu of foreclosure, you must reach out to your mortgage holder and ask them if they will agree to a deed-in-lieu. If your mortgage holder refuses to accept a deed-in-lieu, your only other option is to wait for your mortgage holder to foreclose on the home. When your mortgage holder begins the foreclosure process, it is important to make sure they are only foreclosing “in rem.” This means they are only asking the court for possession of the home and not suing you personally for the debt, since the debt was discharged through your bankruptcy.

Unfortunately, it may take your mortgage holder years to begin foreclosing on the home. It is important to know that as long as the property remains deeded in your name, you will remain responsible for the property taxes, homeowner association dues, the upkeep of the property, etc. If it does take your mortgage holder years to foreclose, it could also mean you will have to wait even longer after you received your discharge in order to purchase a new home. This is because the foreclosure judgment will most likely be reported on your credit report.

If you are behind on your HOA fees and choose to surrender your real property when you file bankruptcy, all HOA fees that became due before you file will be discharged through your bankruptcy. HOWEVER, all HOA fees that become due beginning the day after you file are not dischargeable. This means that you are no longer liable for the HOA fees you owed before the day you file bankruptcy, but you are responsible for all HOA fees that became due after you file.

This situation has been addressed by the 11 U.S.C. § 523(a)(16) of the United States Bankruptcy Code, which states “for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.”

The biggest issue attorneys see time and time again, is that a homeowner will surrender a home through bankruptcy, move out, assume they are no longer responsible for any HOA dues, and then receive a letter from the HOA some time later stating they owe a very large sum for post-filing HOA fees, late fees and attorney fees. Continuing to live in the home and paying the HOA fees as they become due until the house is properly foreclosed on by the mortgage holder or other appropriate party can easily prevent this. A second option, if you wish to move out of the home sooner and instead of waiting for foreclosure, is to sell the house through a short sale.

If you wish to keep your home after filing bankruptcy instead of surrendering it, you may still need to pay the HOA fees you owed prior to filing bankruptcy. This is because HOA’s have the ability to place liens on your home and then enforce them through foreclosure. This means that even if you own your home free and clear or are current on your mortgage payments, you may still lose your home through a HOA foreclosure if your HOA fees are not paid.

If you are thinking about filing bankruptcy and are behind on your HOA payments, it is very important to speak with an attorney before filing. An experienced bankruptcy attorney can help you fully understand the consequences filing bankruptcy may have on your HOA fees. You can call the Law Office of David M. Goldman, PLLC for a free initial consultation by calling (904) 685-1200.

In Florida there is a broad homestead exemption available to those filing bankruptcy; however, you must first meet some very strict requirements. If you acquired the real property at least 1,215 days (approximately 3 years and 4 months) prior to filing the bankruptcy and it is your homestead, then you may use an unlimited homestead exemption, but if you have not, then your homestead can only be protected up to $125,000. It is also important to note that you do not have to reside in the subject property as your homestead for the 1,215 days prior to filing bankruptcy in order to enjoy full protection. For example:

Your mother and father have lived in their current home in Florida as their primary residence for the last 15 years and even filed their homestead exemption with the state. When they pass away, they leave their homestead property to you; free and clear from any mortgage or lien. However, you do not move into the property and instead you continue to reside with your wife and children in another home, which also happens to be in the state of Florida and which you consider your homestead.

During a Chapter 7 bankruptcy, it can be difficult to sell a home. The debtor must first convince the court that the sale will not prejudice ay creditor. A trustee must also obtain the court’s approval to sell a home in order to generate cash for creditors.

However, in a Chapter 13 bankruptcy, a debtor is allowed to sell his or her home as long as the sale does not cause financial harm to the mortgage lender.

Debtors who file for Chapter 7 bankruptcy and owe HOA fees may be able to wipe out these debts. Filing a Chapter 7 bankruptcy is usually a good option if the debtor wishes to give up their home. However, it is important to remember that HOA fees that accrue after filing for bankruptcy cannot be discharged.

A debtor who files a Chapter 7 bankruptcy is required to sign a statement of intention regarding secured debts. This form tells the court and trustee whether the debtor wishes to retain or surrender their property. Debtors who can no longer afford their homes often choose to surrender their property through a Chapter 7 bankruptcy. Through a Chapter 7 bankruptcy, a debtor may be able to discharge all the debts associated with their home, including any homeowner’s fees.

There are a few options for debtors who acquire HOA fees after filing a chapter 7 bankruptcy. One possible solution might include contacting the HOA directly to negotiate a settlement or agreeing to let the association take the property. We recommend contacting an experienced bankruptcy attorney before taking any action.

When a client files for Chapter 7 Bankruptcy they are looking to liquidate all their debt and have a fresh start. With the downed economy this avenue for financial recover is becoming more and more prevalent. As I consult my clients as to their options in Bankruptcy, the number one question I receive is “Will I lose my house in Bankruptcy?” Unfortunately, the answer to that question is not always cut and dry. Meaning just because you file for Bankruptcy does not mean you will automatically keep your home. The main determining factor is EQUITY.

The question of Equity is key to keeping your home. Meaning, if your home has equity and it cannot be covered by exemption, the Trustee may want to sell your home to pay your creditors. However, if the equity amount will be covered by exempt status or the amount will not pay the costs of selling your home the Trustee may decide you can keep it. With that being said, I do not mean you get a free home. I mean you are able to stay in the home as long as you are current and making your mortgage payments.

Warren Bodeker, 89, was ordered to leave the home as it was not exempt from collection by creditors.

“There will be nothing left. I’m not going to have anything.”