Filing For Bankruptcy Can Stop Foreclosure
Nothing is more frightening than the prospect of losing your home to foreclosure. Once your lender initiates foreclosure proceedings, very few things can stop it. One possible option is to file for bankruptcy. Once you file your bankruptcy petition, the automatic stay requires the foreclosure action to stop.
There are foreclosure defenses available within bankruptcy that are not available outside of it. At Ford & Semach, P.A., our Tampa foreclosure defense lawyers will help you with the entire process. After filing your bankruptcy petition, we will get to work immediately and find the best approach to help you keep your home.
Understanding The Automatic Stay
The automatic stay is a powerful legal protection triggered when you file for bankruptcy. It halts all collection activities, including foreclosure, wage garnishment, repossession and lawsuits. For homeowners, this means that once the stay goes into effect, your lender must pause the foreclosure process, even if the sale date is just days away. This temporary relief gives you time to assess your options and implement a plan to save your home.
How Bankruptcy Can Help
Filing for bankruptcy can delay a foreclosure, and if you handle the situation correctly, you may be able to keep your home.
- Lien stripping: If you have a second, third or fourth mortgage on your home, and the value of the house is less than the balance of the primary mortgage, you may be able to have the liens for the subsequent mortgages stripped and have the loans reclassified as unsecured debt.
- Short sales: Forgiveness of a debt is ordinary income. In a short sale, you would owe tax on the difference between the amount of the short sale and the amount you owe on the house. The law exempts the income and tax obligation if the short sale happens during a bankruptcy.
- Arrange to repay arrearages: In a Chapter 13 bankruptcy, you can roll your arrearages into your payment plan and continue making regular mortgage payments going forward, eliminating the threat of losing your home.
- Emergency bankruptcy filings: If last-minute negotiations with your lender have fallen through and foreclosure is imminent, we can attempt to file an emergency to stop the proceeding.
Which Type Of Bankruptcy Is Right For Foreclosure?
The most suitable type of bankruptcy depends on your financial circumstances and goals:
- Chapter 13 Bankruptcy is often the best choice for homeowners who want to keep their home. It allows you to repay mortgage arrears over three to five years while staying current on your ongoing payments. It also enables lien stripping and provides an opportunity to catch up without the threat of losing your home.
- Chapter 7 Bankruptcy may offer a short-term solution by delaying foreclosure through the automatic stay. However, it does not allow for repayment plans. It is generally better suited for homeowners who do not intend to keep the home or wish to discharge other unsecured debts while preparing to transition out of the property.
- Individuals with high-value assets or businesses seeking to restructure real estate holdings may choose Chapter 11 Bankruptcy. This chapter provides flexibility but is typically more complex and costly.
Potential Challenges To Be Aware Of
While bankruptcy can be a powerful tool to stop foreclosure, it is not without risks:
- Missed deadlines: Failure to file required documents or meet court-imposed timelines can lead to dismissal of your case, lifting the automatic stay and allowing foreclosure to proceed.
- Incorrect chapter selection: Filing under the wrong chapter may not provide the protection or relief you need.
- Inadequate budgeting: In a Chapter 13 plan, the inability to keep up with repayment terms may result in case dismissal and renewed foreclosure proceedings.
- Serial filings: If you’ve filed for bankruptcy multiple times, the court may shorten or deny the automatic stay unless you file special motions.
Skilled legal representation can help you avoid these and other pitfalls. At Ford & Semach, P.A., our attorneys will evaluate your financial picture and develop a strategy tailored to help you save your home and move toward economic recovery.
Call For A Consultation
Contact our office today to learn more about our bankruptcy services and how we can help you save your home. We are open during regular business hours and can also meet by appointment in the evenings and on weekends. You can contact us by phone at 813-302-1258 or by email.
We are a debt relief agency. We help businesses and individuals file for debt relief under the Bankruptcy Code.