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Orlando Attorney Lewis Roberts

Can I Use Bankruptcy to Stop Foreclosure in Florida?

Can I Use Bankruptcy to Stop Foreclosure in Florida?

Foreclosures are common throughout Florida. Every day in the Sunshine State, hundreds of property owners find themselves being foreclosed on. Unfortunately, many are not aware of their rights during foreclosure or that the bankruptcy automatic stay will pause foreclosure in Florida.

If you need on-point, effective guidance and representation, contact Lewis Roberts, PA.

Learn how I can help you use bankruptcy to your advantage. 

Call (407) 749-0080 today

Important Facts About Foreclosure and Bankruptcy in Florida

Anyone dealing with bankruptcy in Florida should be aware of a few characteristics of bankruptcy proceedings in Florida:

  • Foreclosures must go through the court system and submit to a process that typically takes between 8 months and just over a year.
  • Florida provides petitioners with a homestead exemption that protects their equity in their property during bankruptcy.
  • A mortgage lender may pursue other assets and funds belonging to the petitioner when a foreclosure sale does not yield funds to cover the mortgage balance.
  • Florida service members have special protections against foreclosure during bankruptcy proceedings.

In all cases, petitioners are strongly advised to seek guidance and potential representation from experienced counsel. Bankruptcy is a maze of procedures and regulations that must be followed to the letter.

The time and money lost due to dismissals invariably result in some level of damage to petitioners’ interests. These costs are better spent on legal representation to get it right the first time and to get the most optimal results.

Can I Use Bankruptcy to Stop a Home Foreclosure in Florida?

The simple answer to this question is yes. Bankruptcy proceedings come with an automatic stay provision that instantly puts a stop to all forms of credit and collections actions against the petitioner, including foreclosure actions.

Chapter 7 and Chapter 13 Bankruptcy Can Both Stop Foreclosure

The two types of bankruptcies that consumers use are Chapter 7 and Chapter 13. Chapter 7 deals with liquidation of assets and erasure of debt while Chapter 13 is centered on restructuring payments and payment plans to address delinquent debt. Which chapter of bankruptcy you should choose is entirely based on your circumstances.

The important takeaway is that the automatic stay provision in bankruptcy law shields all of a petitioner’s assets from collection actions, be they imminent or in process. Since foreclosure is a collection action, foreclosure proceedings must cease once bankruptcy paperwork is filed. More specifically, if you are going through a foreclosure right now and you file either Chapter 7 or Chapter 13 bankruptcy, the foreclosure proceedings will immediately cease.

Chapter 13

Filing for Chapter 13 bankruptcy is typically the most optimal bankruptcy option for homeowners looking to keep their homes. Under the provisions of Chapter 13, creditors and debtors enter into renewed payment agreements. Known as reorganization bankruptcy, Chapter 13 seeks to preserve the original financial arrangements between filers and their creditors by facilitating payment plans that the borrower can handle.

Besides halting foreclosure proceedings, another advantage of filing Chapter 13 is the amount of time given to petitioners to bring delinquent and defaulted debt up to date. In some cases, a petitioner may have up to five years to get all caught up without having to pay any additional interest.

Keep in mind that bankruptcy courts cannot alter certain principal terms of a mortgage, such as material payment terms. For example, it is not lawful for the court to make adjustments to interest rates and other key terms. These terms, however, may be negotiated separately between the parties.

I fight to see my clients get free from unrelenting financial pressure and thrive.

Chapter 7

Chapter 7 bankruptcy is not a viable permanent solution to a foreclosure. It is a liquidation bankruptcy, where the petitioner’s non-exempt assets are liquidated to cover their debts. A petitioner’s home may temporarily be protected from foreclosure once the paperwork is filed. However, eventually, their mortgage lender will obtain permission from the court to proceed with the foreclosure.

Although Chapter 7 itself offers no provisions that allow a petitioner to remain in their home, petitioners may take advantage of the brief pause in foreclosure proceedings to negotiate a new arrangement with their mortgage lender. The advice and experience of counsel are particularly helpful during this stage.

How Does Bankruptcy Affect a Second Mortgage?

A bankruptcy petitioner with a second mortgage could potentially have the mortgage discharged through Chapter 13 bankruptcy. However, the second mortgage must be treated as unsecured debt in order to achieve this end. Unsecured debt is debt without the backing of collateral, such as credit card debt. In its original state, a second mortgage is a secured debt backed by a home.

During bankruptcy, a petitioner’s bankruptcy lawyer may seek to strip the mortgage from the property, making it a stand-alone, unsecured debt. However, the market value of the property must be equal to or less than what is owed on the first mortgage.

Consider a property with two mortgages and a market value of $300,000. If the remaining balance on the first mortgage is $50,000, the second mortgage (worth $75,000) may not be stripped from the house and treated like unsecured debt. However, if the petitioner owes $400,000 on the first mortgage, the second mortgage would qualify to become a stand-alone unsecured debt. Since unsecured debt can be discharged, the petitioner effectively frees themselves from a second mortgage when underwater with the first.

Contact a Bankruptcy Lawyer for Help

Notice of a pending foreclosure is not the end of the story for your residence or building. By filing for bankruptcy, you may be able to buy yourself some time and eventually come up with a plan to save your property. I have helped many clients find solutions through bankruptcy and can potentially help you.

For a consultation with an experienced bankruptcy attorney, don’t hesitate to reach out to my office. Let’s discuss and review your case to explore solutions. Call (407) 749-0080 today.

Bankruptcy Lawyer Lewis Roberts

Attorney Lewis Roberts

The weight of debts that one cannot pay carries financial stress into every waking moment. It is time for this to end. Lewis Roberts, PA, offers solutions to relieve these worries. With over 20 years of experience in helping individuals overcome the burden of debt, bankruptcy attorney Lewis Roberts presents a range of options tailored to each unique situation. Clients can trust his advice on any matter related to debts, as he identifies appropriate options and explains the paths to debt relief clearly and carefully. This ensures that clients make the best decisions for their future. [ Attorney Bio ]