Foreclosure can be highly stressful, especially when you cannot keep up with your mortgage payments. In Florida, foreclosure proceedings can commence after the borrower misses a payment. If you are one of the many Florida homeowners who are struggling with a mortgage, bankruptcy could be a potential solution to saving your home. However, before filing for bankruptcy, it’s essential to have a good understanding of how it works and how it can affect your foreclosure proceedings.
Chapter 7 Bankruptcy and Foreclosure
Chapter 7 bankruptcy is commonly known as “liquidation bankruptcy” because it involves selling your assets and using the proceeds to pay your debts. While it can help discharge unsecured debts, such as credit card debts and medical bills, it does not stop foreclosure. That’s because foreclosure is a secured debt; it’s backed by your home. Filing for Chapter 7 bankruptcy can buy you a little time, but it won’t prevent foreclosure.
Chapter 13 Bankruptcy and Foreclosure
Chapter 13 bankruptcy provides relief for those in debt who are looking to keep their homes. With Chapter 13, you can create a repayment plan that stretches over three to five years, during which time you will be able to pay back arrears owed on your mortgage. This is known as a “cure and maintain” plan; it allows homeowners to catch up on payments while keeping possession of their homes. Once the repayment plan is complete, any remaining debts are discharged.
Automatic Stay
One benefit of filing for bankruptcy is the automatic stay that is put into place. This stay prevents creditors, including mortgage companies, from taking any action to collect the debt. Once a bankruptcy petition is filed, the automatic stay goes into effect immediately, halting any foreclosure proceedings in progress. The stay remains in effect for the duration of the bankruptcy, which means that you have some breathing room.
Exemptions
In Florida, homeowners have a homestead exemption, which protects their primary residence. This means that creditors cannot take your home as long as it falls within specific acreage and property value limits. Homestead exemption provides additional protection for homeowners struggling with mortgage payments and foreclosure.
Does Bankruptcy Stop Car Repossession?
Debt and financial difficulties are overwhelming. This is especially true if you fear losing your vehicle. Having your car repossessed can cause a significant disruption to your daily life, which is why you must know your options before it happens.
If you are a Florida vehicle owner struggling to make car payments, you might wonder if filing for bankruptcy will prevent the repossession of your vehicle. Here’s what you need to know.
Bankruptcy Can Stop Repossession Temporarily
Car repossession is a legal process that creditors can use to take possession of a vehicle when the debtor has failed to make the payments required in the loan agreement. Fortunately, filing for bankruptcy can stop car repossession, albeit temporarily. When you file for bankruptcy, an automatic stay is put in place, which prevents any collection activities, including car repossession.
Types of Bankruptcy
There are two types of bankruptcy that can stop car repossession: Chapter 7 and Chapter 13 bankruptcy.
In Chapter 7 bankruptcy, you can discharge most unsecured debt (like credit card debt, medical bills, etc.) and in many cases, keep your car as long as you can continue to make payments on it. If you do not have equity in your car, or if you have equity but the equity falls within the exemption limit, you can reaffirm the car loan and continue making payments even after the bankruptcy discharge.
In Chapter 13 bankruptcy, you can keep your car regardless of the equity by incorporating the car payments into your Chapter 13 plan.
However, it is important to note that filing for bankruptcy will only stop car repossession temporarily. If you are behind on your car payments, it is imperative that you catch up on them quickly. If you cannot afford the payments, you may want to consider surrendering the vehicle in bankruptcy.
Alternatively, in some cases, you may be able to negotiate with the creditor to modify the terms of your car loan. This could include extending the loan term, reducing your monthly payment, or even adjusting the interest rate. Speak with an experienced bankruptcy attorney to see if this is a possible solution for you.
