Mortgages In Bankruptcy
Due to the housing crisis and the current economy in South Florida, multitudes of people are upside-down or underwater on their homes. This has affected residents throughout South Florida. Our attorneys are dedicated to helping people understand the implications of mortgage debt in bankruptcy. One of people’s biggest fears is the thought of losing their home, their largest and most important asset. If you are facing this situation, there are legal options available to you that can help reduce your financial exposure and allow you ways to attempt to save your home.
At DiTocco Law Group, PLLC, we know this fear can be paralyzing. Our proficient bankruptcy lawyers are here to help you explore every option to save your house and other real estate holdings you own.
Helping Clients Located In Palm Beach, Broward And Miami-Dade Counties With Mortgages In Bankruptcy
Although filing for Chapter 7 bankruptcy will not cure a mortgage default, it can help eliminate any personal exposure you have for this debt. Bankruptcy discharges the personal note being held against you that was signed at the time you bought your house. The lender may continue to pursue the mortgage if you are in default, but you will not be held personally liable, which can relieve a lot of stress.
The Benefits Of Using Chapter 7 To Solve Mortgage Debt, Discharge And Deficiency Problems
More importantly, in recent years, this protection from deficiency exposure has become important because so many people carry a second mortgage or home equity line of credit. This secondary creditor usually gets shut out completely in the foreclosure process, and they are more likely to come after you on this note. Filing for Chapter 7 bankruptcy protection eliminates your personal liability and exposure under the second mortgage in addition to any deficiency that you may owe under the first.
Even though your mortgage is in default, filing for Chapter 7 can help delay foreclosure proceedings and give you an opportunity to negotiate better terms with your lender or modify terms with their bankruptcy department. Our attorneys can also file an automatic stay to temporarily stop a foreclosure action that has already started if we do file for Chapter 7.
It is common practice nowadays for a lender to forgive the deficiency that arises in a foreclosure process. When a lender forgives a deficiency, they will send you a 1099 for forgiveness of debt, which is income on which you may have to pay taxes. The current legislation provides that if the property was your primary residence, that income is not taxable. However, if it is not your primary residence, the income may be subject to taxation. (You will need to consult with your accountant). A discharge received in bankruptcy is not taxable; therefore, to the extent you had taxable exposure in a foreclosure action, a Chapter 7 filing can eliminate that exposure.
Chapter 13 Alternatives
In some situations, filing for a Chapter 13 bankruptcy may be advantageous because you may be able to catch up on past delinquent payments on your first mortgage by rolling these payments into the payment plan. Also, Chapter 13 allows you to utilize a process known as lien stripping. Lien stripping can occur when the first mortgage is already underwater and you also have a second mortgage that no has no security or value in your primary residence. In a Chapter 13, you can strip off this second mortgage and convert it into unsecured debt that is effectively treated like a credit card debt. This debt is then rolled into the payment plan you work out with the trustee to pay over time.
Contact Our Miami-Area Bankruptcy Lawyers For Detailed Assistance
Contact our office online today or call 954-566-9000 to schedule a free initial consultation to discuss how we can help you with your mortgage problems using the bankruptcy process. We have satellite offices located throughout Miami-Dade (Coral Gables and Aventura), Broward (Fort Lauderdale, Plantation, Miramar) and Palm Beach (Boca Raton, West Palm Beach) counties, so you can take comfort in knowing that there is a DiTocco Law Group, PLLC, office near you. Translation services are available for our Spanish-speaking clients. Se habla español.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.