How can I stop a foreclosure through bankruptcy?

If you are deep in debt and facing the foreclosure of your home, bankruptcy might be able to help you save your home or relieve you of the debt depending on which type of bankruptcy you declare.

For those not familiar with foreclosure, foreclosure usually begins when a homeowner falls significantly behind on his or her mortgage payments. The lender then begins the legal process within the court system of obtaining a Judgment of Foreclosure, which allows the home to be sold through a public auction. The process is usually lengthy and includes many steps.

Since the foreclosure process generally does not begin until a homeowner has missed several payments, the owner may have some time to try alternative methods to foreclosure first. Alternative methods include but are not limited to a modification, loan forbearance plan, short sale, or deed in lieu of foreclosure. If these methods have already failed, it may be time to consider bankruptcy.

If you wish to simply be relieved of the debt from your home, a Chapter 7 Bankruptcy may be for you. A Chapter 7 is a strict liquidation of your assets and relieves you from almost all debts. However, there are certain income requirements. A Chapter 7 Bankruptcy is meant for families with lower income.

If you wish to save your home or are a family with high income, a Chapter 13 Bankruptcy might be for you. This type of bankruptcy allows a debtor to bring their mortgage payments current through a repayment plan, which often lasts 3 to 5 years. A Chapter 13 also allows you to participate in Mortgage Mediation in hopes of obtaining a modification of your mortgage that could possibly lower your monthly mortgage payments.

When a debtor files a Chapter 7 or Chapter 13 Bankruptcy, the court issues an order called an automatic stay. An automatic stay stops creditors from trying to collect on certain types of debt. Additionally, the sale of a home scheduled through a foreclosure will be postponed while the bankruptcy is pending, which can often last up to 4 months or longer. However, there is one exception to this postponement when the lender files and wins a Motion for Relief from Stay. This motion asks a court’s permission to proceed with a debt collection or the sale of a home. There are many reasons a court may grant this motion for a lender. The good news is that even if this motion is granted, the court will still usually postpone the sale for a short time.

If you are current on your mortgage payments and are considering bankruptcy for other reasons, you need to know that Florida does have a homestead exemption. The homestead exemption allows a debtor to keep their main residence through a bankruptcy. However, the exemption does not apply to other homes or buildings owed by a debtor. For more information on how to stop a foreclosure or filing bankruptcy with homestead property in Florida, contact the Law Office of David Goldman PLLC.