Winter Garden-Clermont-Orlando Bankruptcy Law Center
Can Bankruptcy Help With Foreclosure ?
You may be able to avoid or delay the foreclosure of your home by seeking bankruptcy protection.
If you are facing foreclosure and the lender has refused to work out a deal or other alternative, bankruptcy may provide some answers.
When you are behind on your mortgage payments, your lender will most likely take steps to begin a foreclosure process. The first document you will be served with is a Lis Pendens. Once a Court rants a final judgment of foreclosure, your house will most likely be sold at a public auction and the amount paid will be applied against what you owe the bank or lender. In many instances this will not be enough to pay off the balance on your loan., In those cases, the lender will still pursue your for a deficiency judgment. payment of your loan out of the auction.
Remember, a foreclosure does not happen in a day, or even a week. It usually takes months before a Final Summary Judgment motion can be heard. This is the hearing where the lender will ask the Court to grant it Summary Judgment and enter an order foreclosing on the property and giving the lender the right to take the property from you.
The foreclosure process typically starts after you fall behind on your payments for at least three months, and often after four to six months. That gives you time to try some alternate measures, such as loan forbearance, a short sale, or a deed in lieu of foreclosure. If you've already tried and failed with these measures, now is a good time to consider bankruptcy as a possibility for avoiding or stalling foreclosure.
How Bankruptcy Can Help
When you file for Chapter 13 or Chapter 7 bankruptcy, the Bankruptcy court issues an order which stops the State court actions where the foreclosure may be pending. This is known as an "automatic stay." The automatic stay requires the lender to stop the state court action immediately. In other words they must STOP all actions against you and come to the bankruptcy courts. Even if your home is set to be sold at a foreclosure sale, the sale will be stopped during the bankruptcy proceedings. There are two EXCEPTIONS:
First, the lender can and usually does, in Chapter 7 cases, file what is known as a Motion to Lift Stay. In this motion the lender asks the bankruptcy court to allow them to proceed forward in order to obtain the right to sell the property if there is no chance you are keeping the property, and when you have told the bankruptcy court you will surrender the property in exchange for relieving you of the debt. If the lender obtains the bankruptcy court's permission to proceed with the sale you will have to leave the house within a few weeks.
Second, if the foreclosure notice has already been filed. Unfortunately, bankruptcy's automatic stay won't stop the clock on the advance notice that most states require before a foreclosure sale can be held.
In Chapter 13 bankruptcies you most likely will be permitted to pay off the "arrearage" (late, unpaid payments) over the length of a 3 or 5 year repayment plan. However, to use this option you need a steady income to at least meet your current mortgage payment at the same time you're paying off the arrearage. Assuming you make all the required payments in your repayment plan you will avoid foreclosure and keep your home.
Also, with Chapter 13 you may be able to eliminate the payments on your second or third mortgage. If your first mortgage is more than the appraised value of your home, it is possible to file a Motion to Value and ask the bankruptcy court to "strip off" your equity lines, second mortgages, third mortgages, and have them considered unsecured debt which, under Chapter 13, takes last priority and often does not have to be paid back at all.
In some cases, you may have no choice but to give up your house. In these cases, at least Chapter 7 will allow you to wipe out the debt that is secured by the home and allow you to make a fresh start.
Remember Chapter 7 Will NOT cancel a foreclosure, only Chapter 13 can do that.
Bankruptcy FAQs
What is a Chapter 7 bankruptcy?
Chapter 7 bankruptcy is the most common type of bankruptcy and is often referred to as a "liquidation bankruptcy." Chapter 7 bankruptcy is used to eliminate, or discharge, primarily unsecured debts such as credit cards or medical bills. Chapter 7 does not eliminate secured debts, such as vehicles (unless the secured item is surrendered) nor will it prevent you from losing your home to foreclosure. If you are in foreclosure, the filing of a suggestion of bankruptcy in the state court action will abate the action but will not dismiss the action.
What is a Chapter 13 bankruptcy?
Chapter 13 bankruptcy results in a plan to repay all or part of your debt, but it is not designed to discharge or eliminate most debts. Chapter 13 is used most often to save a house from a foreclosure sale. Chapter 13 is also useful to eliminate some
Who can still file bankruptcy with new changes to the bankruptcy laws ?
Most people are still able to file Bankruptcy petitions. The changes in the bankruptcy rules require certain things to be accomplished before someone can file a Voluntary Petition for bankruptcy, but the law did not eliminate the right to bankruptcy protection.
Is a credit counseling course required before a Petition for Bankruptcy can be filed?
Yes. This is an absolute requirement and a petition cannot be filed before the credit counseling is completed. You must also attend a financial management course as well. Many agencies offer both courses at the same time. Failure to complete either of these courses and file the appropriate certificates with the court will cause your Petition to be dismissed.
For those persons wishing to file Chapter 13 bankruptcy petitions, the local Chapter 13 Trustee will offer the required courses to Chapter 13 debtors. For those persons wishing to file Chapter 7 petitions, the course must be taken on your own.
Most all bankruptcy education courses are available in person, by phone, or over the internet and are approved for the district in which you are filing. You may get additional information about the costs and availability of debtor education courses at the following internet link: Bankruptcy Education Courses
Who is eligible to file for Chapter 7 Bankruptcy?
Do I have to live in
No. The Orlando Division of the United States District Court for the Middle District of Florida accepts bankruptcy filings from individuals who reside or are domiciled in one of several central
Can I keep my house if I file Bankruptcy?
If you file bankruptcy in
Can my spouse and I file a joint petition for bankruptcy?
Yes. In fact, most married couples should file a joint petition. It does not cost anymore in filing fees or attorneys fees to file a joint petition as opposed to single petition. Spouses who are jointly liable on any debts should file a joint bankruptcy. On the other hand, if only one spouse is liable on most of the debts, the indebted spouse may file an individual bankruptcy, and in most cases, the individual debtor's bankruptcy will have no adverse effect on the non-filing spouse.
Do I have to hire an attorney to file bankruptcy?
The simple answer is – No. However, bankruptcy law is a complicated area of the law, and the courts do not give any special considerations to debtors who file their own petition.
Will a bankruptcy discharge of my student loans affect my future ability to get student loans? A: It depends on the type of loan. Bankruptcy discharges should not affect your ability to get new federal loans and grants. PLUS loans are an exception.– The government will look at prior bankruptcies in considering your creditworthiness for a PLUS loan. A prior bankruptcy will affect your ability to get a private student loan and will also affect the cost of that loan. Private student lenders almost always use credit scores to evaluate loan applications. A bankruptcy discharge will lower your credit score.
The amount of work and fees will vary according to the debtor's income level. As a general guideline, our office charges $1,500 in legal fees for a simple Chapter 7 bankruptcy. In addition to the legal fees you will be required to pay the $299 filing fee, as well as a $50 fee for obtaining a triple agency credit report which will be incorporated into the Petition to ensure that all creditors are listed in the Petition. Failure to list all creditors may result in your Petition being dismissed which could result in penalties against you and your attorney. Therefore, the credit report fee is a requirement here at the Cressman Law Firm, P.A. to ensure that all creditors are listed in the Petition.
Chapter 13 cases are more complicated, as such the legal fees are higher. In addition, if your Chapter 13 case involves a wholly-owned business, or other complicated legal issues, such as the need to file a Motion to Value and Strip off a Second Mortge, or Motion to Value in order to "cram down" a vehicle loan, then the legal fees will be higher. The good news is that our office only requires a down payment of $2,000.00 (plus the filing fee of $274.00) to prepare and file a Chapter 13 case. The balance is paid through the Chapter 13 plan over a period of several months.
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