Foreclosure and Bankruptcy

Foreclosure rates have forced many families and individuals to consider bankruptcy as a means to resolve a imminent or pending foreclosure action.  The Fort Lauderdale bankruptcy attorneys and foreclosure attorneys at Tiller Law have faced these issues for clients throughout the state.  Bankruptcy is a viable option in many cases to resolve a foreclosure but many do not understand what a bankruptcy can and cannot do with regard to a foreclosure.  

If you are current on your mortgage filing Chapter 7 does not mean you have to lose your home.  You are permitted to keep your homestead in Florida.  The only exception is for properties with equity that have been purchased within 2 years of filing.  Consult a bankruptcy lawyer regarding this issue should it be applicable. 

Chapter 7 bankruptcy cannot force a lender to give you a loan modification whether consisting of an interest rate reduction or principal reduction.  A chapter 7 bankruptcy can stop a foreclosure action prior to sale but this is not an objective in itself other than if time is needed to arrange the affairs of the debtor prior to moving.  A loan modification even under the Making Home Affordable Program is in the discretion of the lender.  No Court can force the lender to provide a loan modification and can only ensure that the loan is reviewed.  The Making Home Affordable Program has no private right of action and therefore has no teeth.  The most valuable information that our office can provide is to clarify the misconception of the public perpetuated by loan modification companies and entities promising results that they cannot deliver under programs they do not understand.  That being said,  a Chapter 7 bankruptcy may be the only option available to stop a sale date or other proceeding to give a debtor more time to pursue a loan modification, short sale, or deed in lieu.  Regardless, in many cases the bankruptcy attorney can provide the client with additional time no matter what the objective as long as it is ethical and legal.  

The main benefit provided by a Chapter 7 bankruptcy is the discharge of the debt.  Should a debtor not meet the requirements of a loan modification because of excessive debt to income ratio a bankruptcy may resolve this issue and allow for the debtor to resubmit the loan modification application and increase the chances of obtaining a loan modification.  However, if no loan modification materializes and the foreclosure results the debtor is no longer liable for the debt and will have the fresh start needed by preventing creditors from seizing assets, garnishing wages, or taking other collection actions.

Tiller Law has filed many Chapter 7 bankruptcies in order to stop foreclosure and to assist clients in pursuing loan modifications needed to save their homes or investment properties.  An experienced bankruptcy lawyer and foreclosure defense lawyer can often provide critical guidance during this process.

For many debtors, the home or investment property is upside down and they owe more than they can ever hope to regain from selling the property.  Often short sales are not successful or the foreclosure occurs before the sale can be completed.  The Chapter 7 bankruptcy can eliminate the personal liability of the mortgage debt and allow the debtor to move into the future free of creditor claims.  

In contrast to the information provided above, Chapter 13 bankruptcy may provide debtors with the ability to strip off second mortgages to reduce the secured debt and force the lenders to allow the arrears to be cured over a period of 60 months (5 years).  The advantages of Chapter 13 with respect to real property especially real property in foreclosure is one of the advantages over Chapter 7.  Many homeowners are seeking the protection and benefits of Chapter 13 bankruptcy to protect their homes and investment properties.