Bankruptcy Lawyer - Chapter 13 and Mortgage Foreclosures
10/27/13
Jordan E. Bublick is a Miami bankruptcy lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. He has filed over 8,000 bankruptcy cases. His office is located at 1221 Brickell Ave., 9th Fl. Miami, Florida. Telephone: (305) 891-4055. www.bublicklaw.com
Chapter 13 and Mortgage Foreclosures
Chapter 13 bankruptcy may be the appropriate solutions for many homeowners facing foreclosure of their mortgage.
In using chapter 13 to deal with a mortgage foreclosure, certain time deadlines and special considerations may be present.
Answer of Foreclosure Complaint
One time limitation is that once a foreclosure case has been served upon you, you should answer the foreclosure. It must be answered within the time period set forth in the summons. If you fail to answer it, you may lose all rights to contest the foreclosure case and not receive all the notices in the case before the Clerk of the Circuit Court sells your home.
Filing of Bankruptcy Case.
A bankruptcy must be filed before the foreclosure sale takes place if desire to save your real property. Under chapter 13 you are required to present a plan of reorganization. Typical solution are to try to obtain a modification of your mortgage or tocure a mortgage default and reinstate the mortgage.
Other Factors Regarding Filing of Bankruptcy Case
The first payment under a Chapter l3 bankruptcy plan is normally due 30 days after the bankruptcy case is filed.
Junior Mortgages (Such as Second Mortgages)
Junior mortgages (i.e. all mortgages besides a first mortgage) often have the right to payoff in full any senior mortgage (i.e. higher priority mortgages) if you are in default in order to protect their positions. Such advanced amount would then be part of the "reinstatement amount" due for such junior mortgage. This may make it difficult for you to reinstate such junior mortgage as such reinstatement amount may be a substantial sum--even when divided into installments over 3 or 5 years. This factor may make it wise for one with a junior mortgage to file a Chapter l3 bankruptcy case as soon as possible and before a junior mortgage lender has an opportunity to payoff a senior mortgage.
Income Taxes
In many cases there is no income tax due for the unpaid amount in the event the foreclosure sale is complete. Although the Internal Revenue Code contains provisions for the taxation on the "discharge of indebtedness income", there are three or more exceptions to this rule, such as the "insolvency exception" and is the debt is discharged in a bankruptcy case. You should review the tax consequences with a competent tax advisor.
Deficiency Judgment
Florida law provides for the imposition of a deficiency judgment of the unpaid amount if a foreclosure sale is completed. But historically in Miami, residential mortgage lenders have almost never proceeded to pursue a deficiency judgment. This would continue to be the case, unless there is a change in the practices of residential mortgage lender.
Foreclosure of your mortgage loan may not relieve you of responsibility for your entire debt. If your property does not bring a price at the foreclosure sale sufficient to satisfy your debt, you may remain liable for balance owing after foreclosure, i.e. the "deficiency".
One should note though that if your lender is insured against its loss (for example, V.A. mortgages), their insurer may actually pursue you for the deficiency.
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