Does Bankruptcy Stop Foreclosure?

If you have missed some mortgage payments, you are probably worried about the possibility of foreclosure. Some people simply give up at this point, but many more start thinking of ways they can keep their homes. One of the first options that sometimes comes to mind is bankruptcy. In some cases, filing for bankruptcy will stop the foreclosure process and allow you to keep your home. In other instances though, bankruptcy can help delay foreclosure, giving you more time to determine how you will bring your loan current. Below, our Broward County foreclosure defense lawyers explain.

The Automatic Stay

Regardless of the type of bankruptcy you are filing, the judge will issue an automatic stay. Once the stay is issued, lenders and debt collectors cannot take further action against you until your bankruptcy case is finalized. That extends to your lender that provided you with your home loan. This means that as soon as you file bankruptcy, your lender cannot proceed with the foreclosure process until your bankruptcy case is over.

In addition to being protected from foreclosure at this point, creditors also cannot garnish your wages or take other legal action against you. Even if a foreclosure sale has already been scheduled for your home, an automatic stay can prevent it from occurring, allowing you to stay in your home. The majority of people who file for bankruptcy in Broward County do not lose any of their property. Even when that is not the case though, an automatic stay often gives you enough time to catch up on your payments, so you can bring the loan current either during or soon after bankruptcy.

Click to learn how long it takes to stop foreclosure.

Stopping Foreclosure with Chapter 7 Bankruptcy

You have many options when filing for bankruptcy. The two types of bankruptcy that are most common in Broward County are Chapter 7 and Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, you can have most of your unsecured debts discharged, including credit cards and other types of debt. Certain assets and property are sold off during the process to try and repay your creditors as much as possible.

Both state and federal laws outline certain exemptions from the bankruptcy process. An exemption means that certain types of property are exempt, and cannot be sold during the bankruptcy process. Different states handle the federal exemptions differently. Some states allow consumers to decide between using the federal exemptions or those outlined by the state. In Florida, consumers must use the state exemptions if they are eligible for them.

This is good news for homeowners trying to stop foreclosure by filing for bankruptcy. Florida does not place a limit on the homestead exemption, which is the equity in your home. Because you can protect all of the equity in your home, a Chapter 7 bankruptcy can likely help stop foreclosure.

You must meet two main requirements to be eligible for the homestead exemption. The first is that you must have owned the property for at least 1,215 days before filing for bankruptcy. The second requirement is that the property cannot be greater in size than 160 acres, or one half-acre in a municipality. If you can meet these two requirements, you are likely eligible for the unlimited homestead exemption.

Some other exemptions that apply during a Chapter 7 bankruptcy are as follows:

• $1,000 for personal property
• $1,000 for a motor vehicle
• $4,000 for personal property when the homestead exemption is not used
• The majority of retirement accounts
• Disability benefits and income
• Most government benefits
• Health savings accounts
• Most public benefits

A Broward County bankruptcy attorney will understand the different exemptions you can use to ensure your property is protected during the process.

Stopping Foreclosure with Chapter 13 Bankruptcy

During a Chapter 13 bankruptcy, your property is not seized to pay creditors the debt you still owe. Instead, your debt is reorganized into a repayment plan that is intended to make it more manageable for you to pay it. Still, some of your debt may be discharged during a Chapter 13 bankruptcy. However, it is still important to use exemptions, as they can help decrease the amount you have to pay.

A Chapter 13 bankruptcy may take anywhere between three to five years to resolve, as that is the timeline of most repayment plans. Most homeowners find that their mortgage payments become more manageable with one of these plans and so, they do not end up losing their home.

Many homeowners are also surprised to learn that a Chapter 13 bankruptcy can also help them eliminate a second mortgage on their home. If you have a second mortgage and your primary loan is greater than the current market value of the property, a Chapter 13 bankruptcy can help you eliminate the second loan completely. After the mortgage is removed from the home, it is treated just like any other type of unsecured debt.

Regardless of the type of bankruptcy you are filing, you should work with an attorney who knows the law and can apply it to your case. The bankruptcy process is a long and arduous one, and making even the slightest mistake could put your whole case in jeopardy. Even worse, a small mistake such as omitting property you own or miscalculating a debt you owe may mean being charged with bankruptcy fraud, which is a very serious offense. A lawyer will make sure no mistakes are made in your case, and will help make the entire process much easier.

Call Our Bankruptcy Lawyer in Broward County Today

If you are in fear of losing your home, our Florida bankruptcy attorneys can advise you of your legal options. At Loan Lawyers, our skilled attorneys have helped thousands of people successfully file, and we can put that experience to work for you, too. Call our Fort Lauderdale bankruptcy attorney now at (954) 523-4357 or fill out our online form to schedule a free consultation and to learn more about how we can help.