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People often wonder whether filing bankruptcy would help them when their property is about to be foreclosed on. While it is not the ideal situation, many Florida residents find themselves falling behind on their mortgage payments, and while some consumers are able to work with their lenders, most usually resort to foreclosure. During this process, the person’s home is repossessed and often sold to the highest bidder at a public auction. The proceeds from such an auction are used to pay towards the mortgage and legal costs of the foreclosure. The customer is then required to pay any costs above the amount of the sale.

Filing Chapter 13 bankruptcy can help. In such an arrangement, an experienced bankruptcy attorney can help the homeowner to set up a payment plan that will work towards paying off the current house payments as well as the past due amount. If the agreed-upon payments are always made on time, foreclosure can be avoided. Chapter 13 can also help recategorize 2nd and 3rd mortgages into unsecured debts.

Chapter 7 bankruptcy can also help with 2nd and 3rd mortgages. While it cancels all of the homeowner’s debt that was secured by the home, it also forgives any tax liability that the homeowner has because of home improvements or mortgage. It will not cancel the tax liability if the loan was not used for home improvements or was not a loan.

There are a few alternatives to foreclosure, such as a short sale, loan modification and others. It can be very difficult, however, for homeowners to convince their creditors to work with them once they’ve fallen so far behind on payments. An experienced Florida bankruptcy lawyer can help negotiate with the creditor and possibly avoid foreclosure. The lawyer can also help file Chapter 7 or Chapter 13 to stop the foreclosure process from taking place.

Source: FindLaw.com, “Facing Foreclosure? How Bankruptcy Can Help“, Accessed on March 11, 2017