If a debtor is currently facing foreclosure then the filing of a bankruptcy may be able to either delay the foreclosure sale by a several months or even potentially help the debtor recover from foreclosure altogether.
How Chapter 7 Bankruptcy can delay the foreclosure sale in Florida:
Once a creditor has filed for foreclosure they will eventually schedule a sale date for the property. The sale date will typically be an auction whereby a new purchaser takes ownership of that property and the title is transferred to the new owner. Once the title has been transferred the new owner can use an eviction action to remove the current tenant.
The filing of a bankruptcy, whether a chapter 7 or a chapter 13, allows the court to issue the “automatic stay.” The automatic stay is basically a shield that prevents any creditor from doing anything against the debtor unless they: 1. Get the automatic stay lifted or 2. Wait or the bankruptcy case to terminate.
The automatic stay will likely prevent a foreclosure sale from occurring and could allow the debtor to remain in the home for several other months. The bankruptcy will only be able to do this once, once a creditor schedules a second foreclosure sale, this will likely occur after the bankruptcy, and the sale will be able to proceed and the debtor will be required to leave the home.
How Chapter 13 bankruptcy can help:
The filing of a chapter 13 bankruptcy will allow the debtor to play “catch up” on all the arrears (late or unpaid payments) over a three or a five year repayment plan. The filing of the chapter 13 bankruptcy will also prevent a foreclosure sale from occurring, giving the debtor the time to either come up with a plan to play catch up on the arrears or allow the debtor to stay a few more months in the home before it will be sold at auction.
Chapter 13 may also be able to wipe out 2nd, 3rd, or home equity lines of credit. If a debtor has more than one mortgage on the home then the filing of a chapter 13 may allow the debtor to strip a 2nd, 3rd, or home equity line of credit off of the home. In order to do so the debtor must show that the value of the first mortgage is greater than the value of the home itself, thereby making any subsequent mortgage as wholly unsecured.
The filing of a bankruptcy may have a significant impact on your foreclosure sale. Before filing for bankruptcy you should consult with a bankruptcy attorney to determine the impact of your bankruptcy filing.
Shmucher Law, PL, a bankruptcy law firm, represents debtors, creditors, and trustees in bankruptcy matters throughout Broward and Miami-Dade counties.