Can Filing Bankruptcy Save My Home?

Yes, Bankruptcy Can Save Your Home.

Yes, under certain circumstances a Chapter 13 bankruptcy filed in Fort Lauderdale, Florida, or in any county within the United States can save your home from foreclosure.

The instant you file your Chapter 13 bankruptcy petition, any foreclosure sale will be stopped due to an injunction issued by the bankruptcy court called the automatic stay. The filing of a petition automatically stays most actions against the debtor, co-debtors (even if the co-debtor does not file bankruptcy but this is only applicable in Chapter 13), and the debtor’s property. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally cannot initiate or continue any lawsuits, foreclosures, garnish wages, or make telephone calls demanding payments.

Chapter 13 bankruptcy can help you get caught up on past due mortgage payments. Here’s how it works:

Cure Past due payments:

When a person falls behind on their mortgage and starts to get calls and letters from their bank. They then try to negotiate a modification or also called a payment plan to get caught up. Unfortunately, in most cases, the mortgage modification attempt fails after many months of haggling with the loss mitigation department or the bank’s unreasonable demands, such as arrearages must be paid in one lump sum. When the person can’t afford to come current on their entire past due balance and eventually they lose their home to foreclosure.

Chapter 13 bankruptcy changes the playing field. The bankruptcy code, namely 11 U.S.C § 1325(b)(5), allows a person to “cure and maintain” payments in their chapter 13 plan. What does this mean for homeowners? It forces lenders to accept past-due mortgage payments in increments over a period of 3-5 years which gives many families a realistic chance of getting caught up and saving their home. In Chapter 13, in the Southern District of Florida, a homeowner may include their arrearage payments in a Chapter 13 plan along with their regular mortgage payment which will allow them to catch up over a period of 3-5 years.

For example, let’s say you’re behind 4 months on your mortgage, and your normal monthly payment totals $1,500. The bank demands you pay the $6,000 in arrearages plus late fees to avoid foreclosure. If you are unable to come up with the money, you may file for chapter 13 bankruptcy. Now, rather than being forced to come up with $6,000 all at once, your past due balance is divided over 36-60 months. $6,000 divided by 60 is $100, so your mortgage payment will now be roughly $1,600. If you can maintain this slightly higher mortgage payment and your plan gets confirmed, the bank may not foreclose.

Things to keep in mind:

1. In order to cure and maintain, you’ll need to be able to make normal monthly mortgage payments in order to keep your home. If this isn’t possible, surrendering the home and walking away might be a better option.
2. Chapter 13 bankruptcy will also help with unsecured debts such as credit cards, medical bills, and judgments. Depending on your disposable income after expenses each month, you’ll pay a percentage of these debts back to creditors over the life of your chapter 13 plan. The rest are discharged (forgiven).
3. Chapter 13 carries with it administrative fees. To get started there is a $281 filing fee. In addition, the chapter 13 trustee charges a 10% fee for administering your case and making disbursements to creditors.
4. When your 2nd mortgage is not secured by any equity in your property, chapter 13 allows people to strip that second and even third mortgage.

Take advantage of our free initial consultation and sit down with Fort Lauderdale Bankruptcy Attorney Kristy Qiu, Esq. who will personally evaluate your options. When you need to protect your home, health, and future in the face of serious financial turmoil, put our professionals on your side in bankruptcy court.

To discuss your concerns regarding foreclosure, debt liquidation, or debt repayment plans, contact our offices. Call us at (954) 282-8296 to arrange an initial consultation and find out what we can do for you.