When struggling to make ends meet, one of the biggest concerns for Florida homeowners is whether or not they can keep their homes. Depending on the specific agreement with the lender, most have the right to begin foreclosure proceedings within weeks of a missed payment. For those homeowners who wish to find solutions to their debt issues yet keep their home, there is good news. Filing for bankruptcy in Florida can halt the home foreclosure process by your lender. Filing either Chapter 7 or Chapter 13 bankruptcy automatically generates a court-ordered stay on all debt collection actions against you.
This automatic stay requires all collection actions – such as wage garnishment, repossession of property, and foreclosure sales to cease. The stay is designed to give debtors the time they need to catch up on payments or restructure their financial obligations without losing their place of residence immediately. However, it’s important to understand that the automatic stay is a temporary action. It does not permanently cancel or erase the foreclosure – it pauses the process to give the homeowners time to work out alternate payment arrangements with the lender or otherwise make arrangements.
Brief Review: Chapter 7 and Chapter 13 Bankruptcy
In a Chapter 7 bankruptcy, a trustee has the authority to sell the filer’s non-exempt assets and utilize the proceeds to pay back creditors. However, in Florida, the homestead exemption more than likely protects the equity in a filer’s primary residence.
Therefore, Chapter 7 may represent an effective way to stop foreclosure and discharge personal liability for the mortgage debt. However, the lender has the right to request to proceed with foreclosure after bankruptcy, so Chapter 7 only provides temporary relief and does not guarantee any long-term protection of the home.
Chapter 13 bankruptcy does permit the filing party to keep the home while they reorganize their debt. A 3–5-year repayment plan is structured and approved by the court, allowing the homeowner to make up missed payments and prevent foreclosure. To qualify for Chapter 13, the individual is required to have verifiable, regular income to fund the repayment plan and continue making mortgage payments. The plan must be structured so as to pay back at least as much as creditors would have received in Chapter 7.
Chapter 13 allows Florida homeowners to cure mortgage arrears over a period of time while staying in their homes. The 3-5-year repayment plan must be completed successfully to receive a discharge of the mortgage debt.
Alternatives to Halt Foreclosure
Bankruptcy offers robust protection to those who wish to keep their home, but it is not the only option. Loan modifications and home sales/short sales can also stop foreclosure in some instances. It is best to consult with professionals who can give you advice regarding each option – whether a financial advisor, a real estate broker, or a bankruptcy attorney. There may be specifics to your situation that make one alternative a clear choice over the others.
Florida Foreclosure and Bankruptcy Law
Here are some important provisions in Florida law relevant to bankruptcy and foreclosure. Individuals should always consult with an experienced bankruptcy attorney before proceeding, as laws and regulations are always subject to change. There may also be provisions or caveats not listed in this short-form blog. Click here to consult with a Sarasota bankruptcy attorney.
- Florida is a judicial foreclosure state. This means that lenders must go through the courts to foreclose on a property. The home foreclosure process averages 8-14 months.
- Florida’s homestead exemption laws protect all equity in a primary residence during bankruptcy.
- Lenders can take further action against borrowers in Florida bankruptcy cases if the proceeds from the foreclosure sale do not satisfy the mortgage balance.
- Those who file Chapter 13 in Florida can pay back mortgage arrears through their court-approved repayment plan.
- Service Members: The Florida Bankruptcy Code contains certain protections for service members against foreclosure. Ask your bankruptcy attorney about the Servicemembers Civil Relief Act.
Call a Bankruptcy Attorney to Halt Foreclosure
Bankruptcy, especially one involving home ownership, can be complex. But when you hire an experienced bankruptcy attorney, you can be confident that you are doing all you can to protect your home. If you wish to explore your options through bankruptcy, call the law offices of Richard V. Ellis today. With thousands of cases behind us, we have the skill and the compassion to make sure you make the best choice for you and your family.
