Florida Bankruptcy Lawyers on Foreclosure
If you are in arrears on your mortgage and no means to catch up is apparent, then Chapter 13 bankruptcy may be your best option. Chapter 13 is also know as the “Wage Earner” plan or “Reorganization Plan” in that it will allow you to stay in your house and pay off your arrearages over a length of time far longer than you probably could have negotiated with your lender by yourself. Florida bankruptcy lawyers can assist you in understanding the Chapter 13 schedule.
Chapter 13 bankruptcy petition will also absolve you of any second or third mortgage you may have on your home. Your first mortgage is secured by the entire value of your home. If the value of your home has dropped significantly, then there will be no value left over to guarantee the second or third mortgage. As a result, the bankruptcy court will classify these other mortgages as “unsecured debt”. Unsecured debt is last in line to be paid off in a Chapter 13 filing and may, therefore, be discharged leaving you owing nothing on them.
At one time, borrowers were responsible for any tax losses incurred by the lender as a result of foreclosure. But, thanks to a new law that took effect in 2007, you are no longer liable for those losses. However, you will not be protected from those taxes if the additional mortgages were not used for improvements to the securing property or if those loans were secured by other property, such as a second home.
Chapter 7 and Foreclosure
Chapter 7 bankruptcy may not save your home. As Chapter 7 is often referred to as “liquidation” bankruptcy, the court may order you to sell your house in order to pay off debts. Only if you have no equity in your home would Chapter 7 work to your advantage.
Even if a Chapter 7 discharges the arrearages on your home, you may still owe that amount to your lender. Why? Because, when you bought your home, you signed 2 documents – one was a promissory note that obligated you to pay the mortgage and the other was an agreement that could be recorded as a lien in the event you failed to make your payments. So, by this time in your situation, your lender has probably already recorded this second document as a lien against you. And, even if the Chapter 7 discharges your debt, it has zero effect on this lien against you so you will probably have to relinquish the home anyway as it was the collateral for the mortgage note.
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