Legal Question in Real Estate Law in Florida

I tell clients that Chapter 7, at its core, neither helps nor hurts with saving a house in a foreclosure. When you file a Chapter 7, the stay comes into effect and stops the foreclosure suit in its tracks. A secured creditor such as the home mortgage lender will ask the Bankruptcy Court for permission to continue the foreclosure suit, for the sole purpose of obtaining title to the property (but not to allow them to pursue you on the money debt or on a deficiency).

So while a Chapter 7 stops the foreclosure action, that stoppage is usually only thirty days or so, and then the foreclosure action can be resumed. On the other hand, the filing of a Chapter 7 case does not speed up the foreclosure suit.

What a Chapter 7 case will do for you is to "discharge" any liability for a deficiency if the property is worth less than the loan amount.

If the foreclosure action is your only reason to file a Chapter 7, I probably would not recommend it. Many lenders do not pursue deficiency claims on mortgage loans on a primary residences in Florida, and presumably you could file a Chapter 7 in the future if they did pursue you.

One other issue: you have to "qualify" to file a Chapter 7 (with certain limited exceptions) based upon your income. The existence of the mortgage debt obligation may help you qualify for a Chapter 7 now, whereas without that obligation you might not qualify. If that's the case, and I have no way to know whether it is or not, then you may want to file before the foreclosure sale is completed.

Robert Wilcox

(904) 281-0700

The filing of a Chaper 7 Bankruptcy will temporarily stay the pending foreclosure proceeding, but as the lender is a secured creditor with its loan being secured by a mortgage on the property which is being foreclosed, the lender will most likely be successful at having the automatic bankruptcy stay lifted so that the foreclosure proceeding can continue.