Can a Chapter 13 bankruptcy save you from foreclosure?

On Behalf of | Apr 29, 2023 | Real Estate

Falling behind on the mortgage can happen to anyone, and foreclosure threats can be terrifying.

However, Florida law has more than one way to protect you from losing your home.

Filing for Chapter 13 bankruptcy during a foreclosure

A Chapter 13 bankruptcy gives you the opportunity to reorganize your debt. In some cases, it may provide as much as five years for you to catch up on default payments without the burden of interest.

If you have a second mortgage on your home, Chapter 13 may remove the first. For example, if your first mortgage exceeds the current value of your property, filing bankruptcy could result in the forgiveness of your second mortgage.

Understanding how Chapter 13’s automatic stay provision helps

When you file a Chapter 13 or a Chapter 7 bankruptcy, Florida’s automatic stay provision will immediately stop the foreclosure process. An automatic stay stops all debt collection actions currently against you and prevents anyone from garnishing your wages, contacting you for collection or repossessing any property. If your home is already up for foreclosure sale, bankruptcy will stop that as well.

Typically, an automatic stay order will remain in effect as long as your case is open. Should a creditor decide to continue collection efforts after an enacted stay, they must first apply for and receive approval from the bankruptcy court.

The purpose of a Chapter 13 bankruptcy is to remove the burdens hindering you from paying your debts and help you get back in line without financial devastation.