When someone is facing the possibility of bankruptcy, the thought of losing his or her home is a very real and frightening one. However, the protections of the bankruptcy automatic stay can help the filer protect his or her home through a Chapter 7 or Chapter 13 filing. The key to this protection rests heavily on the type of bankruptcy filing and the filer’s financial situation. The bankruptcy automatic stay also offers filers who are facing a multitude of collection calls relief from their creditors, protect them from lawsuits, wage garnishment, repossession, and losing valuable property.
As soon as the bankruptcy petition is filed, the automatic stay goes into effect. After this point, creditors and debt collectors are legally barred from attempting to collect on any debt owed by the filer.
Bankruptcy Exemptions and Home Equity
The first determining factor when it comes to the filer keeping his or her home has to do with equity in the home and whether the filer can protect this equity during either a Chapter 7 or Chapter 13 bankruptcy case. In both types of bankruptcy cases, the filer can protect certain assets through claiming a bankruptcy exemption for that asset.
Florida has generous bankruptcy exemptions, including homestead exemptions to protect the person’s equity in his or her home. In fact, the homestead exemption is unlimited in the State of Florida for those filing for bankruptcy. Florida has one of the most generous homestead exemptions in the country. Under Florida’s bankruptcy exemptions, a homeowner can exempt an unlimited amount of value in his or her property so long as the property covered is not more than half an acre in a municipality or 160 acres in any other location. The homestead exemption protects real or personal property, including a home, condominium, or mobile or modular home. The key is, however, the homeowner must have bought and owned the property for at least 1,215 days prior to the bankruptcy filing. Otherwise, the home may not be exempt.
Chapter 7 Bankruptcy
Being able to protect the filer’s equity in his or her home can only get so far. Other requirements must be met, including being able to continue making payments on the home. Many times, when someone is filing for Chapter 7 bankruptcy, he or she is drowning in debt to the point where that person has also fallen majorly behind on house payments. If the filer is current, however, on his or her house payments, he or she may be able to keep the home even under a Chapter 7 case. The key is he or she must keep his or her payments current through the bankruptcy and beyond. One thing a Chapter 7 bankruptcy case does not do is allow a person who is already behind on mortgage payments to catch up. This protection is offered through a Chapter 13 bankruptcy.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, the filer works with the bankruptcy trustee to develop and implement a debt repayment plan that lasts between three-to-five years. Many times, if a filer is behind on his or her mortgage payments, this repayment plan can allow the person to catch up on his or her past-due mortgage payments while keeping current on them, as well. In this repayment plan, the past-due mortgage debt is treated as a separate debt and is simply added into the plan. Once the plan is created and so long as the filer remains current on his or her mortgage payments, no action can proceed to foreclose on the home. If the homeowner has second or even third mortgages, these debts can potentially be eliminated or liquidated upon the conclusion of the bankruptcy case depending on the repayment plan.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.