In Florida, filing for bankruptcy can help a family protect its home both from foreclosure and from other collection actions.
With respect to other creditors, aside from a mortgage lender, bankruptcy is a powerful shield from collection actions against one’s home.
Florida has a generous exemption which allows a family to declare all of the equity in one’s home exempt from being turned over to creditors. Effectively, this makes the family home safe from collection once the family files a valid bankruptcy.
However, the situation is more complicated with respect to mortgage lenders who have a lien on the property, as these lenders have the right to foreclosure.
Both a Chapter 7 and Chapter 13 bankruptcy can help distressed homeowners
At a minimum, in most cases both a Chapter 7 and Chapter 13 bankruptcy can prevent a mortgage foreclosure from going forward at least for a time.
This is because bankruptcy filers will usually receive the benefit of an automatic stay, which is a court order requiring that creditors stop collection efforts, including foreclosure proceedings.
However, it is important for residents of the Tampa Bay area to realize that Chapter 7 will not stop a foreclosure in the long term.
Chapter 7 does benefit a family in that it wipes out any personal liability for the home loan, meaning that even if the lender takes back the house, it cannot pursue the borrowers personally by, for example, garnishing their wages.
On the other hand, if a family really wants to fight for their home, they may consider a Chapter 13 bankruptcy. If they get a payment plan approved and follow through on it, they may be able legally to catch up on back payments and thus prevent a foreclosure.
Bankruptcy is potentially a good option for homeowners in financial trouble. However, the option and alternatives should be discussed with an experienced attorney.