Bankruptcy in Foreclosure: Is it good or bad?
What is foreclosure?
Foreclosure is a process in which missed mortgage payments force the lender to take back their property. In Florida, this process is done in court in front of a judge where your property would then be eligible to be placed on auction and sold. Those dealing with foreclosure are expected to cover any remaining legal costs and the difference in price between the homes value and auction price. Due to this, many homeowners facing foreclosure are now looking for viable solutions. Those include direct sale, listing with a realtor, or bankruptcy. Read below to learn more about how bankruptcy in Orlando works in a foreclosure and if it can help you.
If you are facing foreclosure you are not alone. Hundreds of families face foreclosure every month. Just like those other families filing you may have considered bankruptcy as a way to help your situation. In most cases, you can delay or save your foreclosure by filing for Chapter 7 or Chapter 13 bankruptcy in Orlando. Though this isn’t always the best choice and along with the possible benefits, there are also negative consequences of bankruptcy. These include losing your right to contest a foreclosure, and a negative credit hit.
Bankruptcy in Orlando can be filed seconds before the foreclosure is placed on auction. Realistically though the need to begin working on bankruptcy is needed well before the auction takes place. This is to be sure that everything is in order and correct as Florida foreclosures are extremely technically despite the growing foreclosure crisis. Filing for bankruptcy also negatively affects your credit. While in the long-term bankruptcy can actually help your credit as it bars lenders from making any negative marks against your account pre-bankruptcy the short-term effects can be detrimental to future plans.
Chapter 7 Bankruptcy
With a Chapter 7 bankruptcy, all debt collection against you will be stopped. This includes any foreclosure actions. Though this is only temporary, lasting about three to four months, and you will need to have a plan of action once it is lifted. Your lender or borrower has the ability to petition the bankruptcy and ask the court to lift that stoppage for the foreclosure action. In most cases the court will grant the lender’s request shortening the time you would have had to two to four weeks. This is usually seen as a last resort option which generally only prolongs the inevitable. Filing for a Chapter 7 foreclosure also can affect any future of buying a home. Generally, you will be unable to secure a normal loan for up to four years after the filing. If your foreclosure is inevitable though and you still plan on filing for bankruptcy, filing for Chapter 7 bankruptcy before can reap you more benefits.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, on the other hand, may be an appropriate option for you if you have missed several mortgage payments but are confident you are able to start making payments again. When you file for Chapter 13 bankruptcy you and your lender will have to negotiate a new payment plan also incorporating all previous due fees. Typically, this takes place somewhere between a three to five-year period. Through this new payment plan, your case will still be under the jurisdiction of the bankruptcy court and you must make all payments under the courts new negotiated payment plan. Filing for Chapter 13 bankruptcy can stop you from purchasing a new home for up to two years.
Not many foreclosures will fall under Chapter 13 bankruptcy or your situation. Getting in touch with a knowledgeable lawyer is the first step.
The laws around foreclosure and bankruptcy are always under scrutinization and changing. In bankruptcy, you the debtor agrees to relinquish the property back to the lender. In doing this your loan is dismissed or you are left to pay a much lesser amount. In recent years in Florida, many homeowners would file for bankruptcy and relinquish the home only to fight the case in court once the foreclosure continues. This has led to some being able to occupy a home for months, or even years without paying a dime. Starting October 1st, 2018, a new law has been enacted which gives up the right to fight a foreclosure in court if you have filed for bankruptcy and relinquished ownership of the property. This limits how some use bankruptcy in Orlando to fight foreclosure.
Be aware though that you may still be able to raise a defense a talking with your lawyer is truly the only way to know your defense and rights.
Bankruptcy in Orlando – Good or bad?
Filing for bankruptcy is usually seen as a last resort option. But under the right circumstances, it might be your only or best option. Being informed is your number one defense against foreclosure. Be sure to talk with your lawyer to best look over your plans and look at all your options. 407Foreclosure Help has been helping people through foreclosures and find homes for over a decade. We buy and sell homes and also help inform those in need of their best options. Contact us here to get in touch and learn how we can help!