One of the biggest fears of individuals considering filing for bankruptcy isn’t answering the phone and having another creditor be on the other end. The thought of losing one’s home or car can weigh heavily during the decision to file. There is relief however, and it may be found in actually filing.
Filing for bankruptcy can help you save your home in a few different ways.
- Prior to filing for bankruptcy, you should seriously consider hiring a bankruptcy attorney. A bankruptcy attorney will be able to review your finances, debts, and other circumstances to determine the best course of action for you. They will be able to inform you of whether you can expect to save your home or if it will be considered an asset and be confiscated by the bankruptcy court. Florida does have exemptions that you may qualify for and an attorney will ensure that you are aware of this and how to proceed.
- When you file for bankruptcy, an “automatic stay” is issued, which ceases all collection actions against you. This includes phone calls, repossession, wage garnishments, and foreclosure. An automatic stay is not permanent and will only last for a few months; it should not be considered as a permanent solution to your financial problems. This brief period of reprieve will at least buy you some time to consider other, more lasting options.
- If you file under Chapter 13 bankruptcy, you may be able to save your home by establishing a repayment plan on the arrears you owe on the mortgage over a period of time, usually 60 months. This amount is added to your regular monthly mortgage payment. The only additional consideration you should have is if you will be able to keep up with the payments; if you miss a payment, then your lender will be allowed to resume collection actions against you.
- Remember that you will not be able to keep your home without first paying for it. Bankruptcy will not discharge your mortgage loan. It can however, discharge your liability if there is a deficiency after a foreclosure. A deficiency is the difference between the amount you owe the bank and the amount that the bank is able to sell the house for. For example, if you owe $200,000 to your mortgage lender and the bank sells the home for $175,000 then you are still responsible for the $25,000 difference. If you had filed for bankruptcy (and not reaffirmed the debt) then the $25,000 would be discharged, meaning you would no longer be responsible for repaying it.