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Can filing for Chapter 7 bankruptcy stop foreclosure in Florida?

When you are behind on your mortgage payments, you may feel as if you have limited options. You do not want to lose your home, but neither can you afford to keep it. What, then, can you do?

If you have already considered bankruptcy but dismissed it, consider it again. Filing for Chapter 13 is the best way to retain your house. However, if you do not have enough income to follow a repayment plan, then you may have to go with Chapter 7 if you qualify under the means test. Unfortunately, Chapter 7 cannot terminate a foreclosure, but it does come with the following benefits.

Delaying foreclosure

Filing for bankruptcy automatically puts a temporary stop to debt collection and foreclosure efforts until the process is complete. This buys you some time to figure out what options you have for trying to keep your home. These may include negotiating with the lender or securing financing. There is the chance that the lender will request the court's permission to proceed with the foreclosure, but there is no guarantee the lender will resume the foreclosure right away either.

Canceling debt

Although Chapter 7 cannot cancel a foreclosure, it can cancel some of the related debt, such as the mortgage and home equity loans. It can also get you out of tax liability. It cannot eliminate liens, though, which bring the risk of losing your home.

The additional debts that Chapter 7 wipes out plus the time it takes to go through the process allow you to save up money. You may be able to use the savings toward mortgage payments, or if not, then toward a new residence.

Is Chapter 7 right for you?

Chapter 7 may not be your first choice, but it certainly should be one of them, especially if Chapter 13 will not work for your situation. The best way to find out what is the right action to take is by speaking to a Florida bankruptcy attorney.

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