Should I Avoid Bankruptcy If I Am Facing Foreclosure?

Consumers in South Florida who are struggling with debt often have questions about the best way to handle their debt, and about their options for getting back on track with certain creditors or getting a fresh start financially. While many consumers understand that there are links between bankruptcy and foreclosure, it can be difficult to understand how they are related and when bankruptcy might actually be an alternative to foreclosure. Our West Palm Beach bankruptcy lawyers have more information.

Alternatives to Bankruptcy When You Are Facing Foreclosure 

If you are facing foreclosure and you do not want to file for bankruptcy, but you want to take action to avoid foreclosure, you might have a few options available to you. According to the U.S. Department of Housing and Urban Development (HUD), there are a variety of alternatives to foreclosure and to bankruptcy when you are struggling with mortgage debt. Those options may include, for example:

• Mortgage modification;
• Short sale; or
• Deed in lieu of foreclosure.

In most cases, while these options can stop foreclosure, one of these options above will not solve other debt issues unrelated to your mortgage. Accordingly, if you have significant debt beyond your mortgage debt, you may still be considering the possibility of foreclosure.

Chapter 7 Bankruptcy Will Not Allow You to Keep Your Home 

When it comes to bankruptcy and foreclosure, it is important to understand that Chapter 7 bankruptcy is not an option to avoid losing your home. While the automatic stay — the injunction that applies once you file for Chapter 7 bankruptcy and any other type of bankruptcy — will prevent your lender from moving forward initially with foreclosure proceedings, it will not stop action against your home forever. Despite Florida’s very generous homestead exemption that allows debtors to exempt the full amount of equity in their homes, unless you have an option for paying what remains on your mortgage or reaffirming the debt with the approval of the lender and the court, you will most likely lose your home in a Chapter 7 bankruptcy.

Chapter 13 Bankruptcy Can Actually Be a Tool to Prevent Foreclosure When You Are Struggling with Mortgage Payments

 While many homeowners think about alternatives to bankruptcy when they are struggling with mortgage debt, it is critical to know that Chapter 13 bankruptcy can actually be an alternative to foreclosure. This type of bankruptcy stops the foreclosure process immediately through the automatic stay, gives you an opportunity to catch up on mortgage payments through your debt reorganization plan, and ultimately can allow you to remain in your home.

Contact Our Bankruptcy Attorneys in West Palm Beach 

Struggling with debt can be difficult, and situations can become particularly complicated for homeowners who also may be facing foreclosure. If you have any questions about how a bankruptcy filing could impact foreclosure, or if you want to learn more about your eligibility for Chapter 13 bankruptcy in order to prevent a foreclosure and to get caught up on your mortgage payments, you should contact an experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller today. One of our advocates can learn more about your case and discuss your options with you.

Sources:

huduser.gov/periodicals/ushmc/fall95/fall95.html

law.cornell.edu/uscode/text/11

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222.html