Can filing for bankruptcy save your home from foreclosure?

If you are struggling to make your monthly mortgage payments and facing foreclosure, you may feel like there is no way out.  A sudden illness, divorce or job loss can cause a person to fall months behind on their bills and enter a cycle of debt.  The debt cycle is propelled by the person continuing to borrow due to the high interest costs. At a certain point the amount of interest becomes a significant monthly expense and the debt level increases even faster, oftentimes resulting in default. 

Filing bankruptcy may be the most powerful tool in protecting you from your creditors and putting you back in the driver’s seat.  Filing for bankruptcy can also protect your home from foreclosure. The ability to strip off your second mortgage in a Chapter 13 bankruptcy along with modifying your first mortgage is a clear indicator.  

A Chapter 13 bankruptcy allows the filer to work directly with the bankruptcy trustee to prepare a three-to-five-year long repayment plan where the filer pays off some or all his or her debt. Remember, only the creditors who file a timely proof of claim will share in the Chapter 13 bankruptcy payments. Clients will receive a full discharge of debt owed to creditors who do not comply with these requirements.  

If you are behind on your mortgage payments, Chapter 13 will allow you to gradually get caught up on your payments. Under a Chapter 13 bankruptcy, you will be allowed to keep all your property, whether it be covered by one of Florida’s property exemptions or not, so long as you continue to make the monthly payments under the plan. Once all the payments detailed in the plan have been paid, all dischargeable debts will then be eliminated. 

Florida’s bankruptcy exemptions allow you to claim an unlimited amount of equity in your home. It has been said that the State of Florida has one of the most generous homestead exemptions out of all 50 states. Under the Florida homestead exemption, you can exempt an unlimited value in your home or other property that would be covered by the homestead exemption. To be allowed to utilize the Florida homestead exemption, you must have owned the property for at least 1,215 days prior to filing for bankruptcy, which is just over three years. This exemption does not mean, however, that you can escape the debt. It is important that you continue making mortgage payments to keep your home. 

Payments must remain current on the mortgage during the Chapter 13 case. If your situation is to the point where you are facing foreclosure, however, it is very likely you are not current on these payments. However, the bankruptcy trustee may be able to work with your lender on a payment structure that allows you to continue paying on your mortgage at a potentially lower amount. You will be paying the debt owed to the trustee who will then pass the payment on to the mortgage lender.  

Both a Chapter 7 and Chapter 13 bankruptcy give the filer the benefit of the automatic stay, which puts an immediate halt to any collection proceedings on debts owed, including foreclosure proceedings. The lender can request that the automatic stay be lifted, but this can only be done through a formal petition to the bankruptcy court. If the bankruptcy trustee can show the lender that the proposed repayment plan allows the filer to catch up on mortgage arrearages owed, it is possible that the foreclosure will stop in order to allow the filer to at least try to catch up. 

The beauty of a Chapter 13 bankruptcy repayment plan is that it allows you to catch up on past mortgage payments without having to pay them all at once. The plan should distribute the total amount owed on past-due payments over the course of three-to-five years. So long as you keep up on mortgage payments through the Chapter 13 bankruptcy plan, the mortgage lender cannot pursue the foreclosure. 

If you happen to have home equity lines of credit, second mortgages, or unsecured loans not otherwise secured by equity in your home, these debts will likely be discharged at the end of the repayment period. 

If you have questions on this topic or are struggling with debt, call our law firm to schedule a free consultation. Having debt makes you stay up at night. It stresses you out. It ruins relationships. I went through it. Boldly, I mustered up the courage to call a bankruptcy attorney and I pressed the restart button in 2008. And even though eleven years has passed since I made that decision to restart my life, I never forgot what it did for me and how it helped me start over.

It even inspired me and my law firm to become the largest filers of bankruptcies in the country and in the top two in Florida- all from our offices in Orlando and Kissimmee. The Benenati Law Firm has eliminated nearly a billion dollars of debt for its bankruptcy clients, making the firm one of the top twenty filers of bankruptcy in the nation. Remember, we are local in your hometown. We make our hours convenient for our clients and offer free consultations on Saturdays (9:00 a.m. – 3:00 p.m.) along with our normal business hours throughout the week. Go to or call 407-777-7777 to set up a free private consultation and learn more information. Because Life Has a Restart Button.