Owning a home is the American dream. However, keeping up with the monthly mortgage is a challenge. If you’re in danger of losing your house because of missed payments, you may want to consider filing for bankruptcy. Although many think bankruptcy means losing everything, it may actually help save your home from foreclosure.
How bankruptcy protects your home
Filing bankruptcy creates an automatic stay. This order stops any creditors from trying to collect on your missed payments. As such, this immediately stops any foreclosure proceedings.
Additionally, Florida has a generous homestead exemption in its bankruptcy laws. If your home is your primary residence and isn’t over half an acre if you live within the city, the exemption offers unlimited home protection. This means you can keep your home while working through bankruptcy.
Why Chapter 13 offers the best protection
Chapter 13 bankruptcy creates a structured repayment plan spanning three to five years. This allows you to:
- Keep your home while catching up on missed payments
- Spread past-due amounts across your repayment period
- Maintain regular mortgage payments moving forward
- Possibly eliminate second mortgages in some cases
- Reorganize other debts to free up money for housing
In short, Chapter 13 gives you time to slowly pay off your debt and stabilize your finances while staying in your home.
Limitations of Chapter 7 in foreclosure cases
Chapter 7 bankruptcy provides temporary relief through the automatic stay, pausing foreclosure for about four months. However, this brief pause only delays the inevitable.
Without a repayment plan, lenders can resume foreclosure once your bankruptcy case ends—potentially leaving you without a home.
Keep your dream home and get a fresh start
Bankruptcy offers hope when foreclosure threatens your home. Specifically, Chapter 13 helps you create a manageable plan to catch up on payments. Consider speaking with a bankruptcy attorney before filing bankruptcy. They can evaluate your situation and help you explore your options to protect your home and restart your finances.