Bankruptcy

The Bankruptcy Code governs all US bankruptcy matters. The federal government is also responsible for laws governing the procedures and the forms used in bankruptcy (Federal Rules of Bankruptcy Procedure). The bankruptcy procedures and forms used are the same in every state. But state laws play a role in determining property rights, so the outcome of your bankruptcy proceeding may vary depending on where you file.

Bankruptcy cases are filed at United States Bankruptcy Courts across the county. The court assigns a trustee to oversee the bankruptcy.

You will either file a Chapter 7 or a Chapter 13 bankruptcy. Chapter 12 bankruptcy is also available to family farmers and fisherman. You can only file for a Chapter 7 if you meet specific income requirements. If these requirements are not met, then you must file a Chapter 13 bankruptcy.

Chapter 7, entitled liquidation, lets the trustee take over your assets, reduce the assets to cash, and make payments to creditors. Depending on your income, you may receive a discharge that allows you to not pay back some of your debt. Not all debts, though, can be discharged. Child support, criminal restitution, and most student loans cannot be discharged.

Chapter 12 bankruptcy, allows farmers and fishermen who have a “regular annual income” to enter into a repayment plan that takes place over a three- to five-year period. Chapter 12 bankruptcies have some unique provisions that take into consideration the specific needs of farmers and fisherman. For example, it takes into account that some farmers or fisherman may only have a seasonal income.

Chapter 13, entitled reorganization, is used when you have some regular source of income and can enter into a repayment plan that will take place over a three- to five-year period. In Chapter 13, you can keep your home and other valuable assets. You do not receive an immediate discharge of debt and will only receive a discharge if payments are made through the repayment plan. During the repayment plan period, you are protected from lawsuits, garnishments, and other creditor actions.

Reasons Why Bankruptcy Cases Are Dismissed: https://www.flsb.uscourts.gov/common-reasons-bankruptcy-case-dismissals

**Be aware that slightly over 50% of Chapter 13 cases filed in calendar 2019 were unsuccessful. This figure was obtained from Table 6, 2019 Report of Statistics Required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, meeting the requirement of 28 U.S.C. § 159(c)(3)(F)(ii), provided here. See Page 4, 11th Circuit, M Fla and S Fla for statistics for your area:

Helpful Materials

Bankruptcy Basics videos from the U.S. Courts

STANDLEY LAW OFFICE, P.A.
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Timeline for Chapter 7 cases (obtained from BK Court, Middle District of Florida): https://www.flsb.uscourts.gov/chapter-7-bankruptcy-timeline

Timeline for Chapter 11 Small Business cases, SubChapter V (obtained from BK Court, Middle District of Georgia):

Timeline for Chapter 13 cases (obtained from BK Court, Western District of Missouri):

Chapter 13 Plan calculator (obtained from Trustees, Middle District of FLorida):

Bankruptcy Basics booklet (obtained from BK Court, Southern District of Florida):

Checklist for Required Documents in Banrkuptcies under Chapters 7 and 13 (obtained from BK Court, Middle District of Florida)

Notice required by 11 U.S.C. 342:

Before filing bankruptcy, you should try to resolve the matter by:

  • Short-term issues (1-3 Months)
  • Calling the lender and requesting more time
  • Contact the mortgage lender or servicer and request forebearance, reinstatement, or a repayment plan

Longer-term issues (3 or more Months)

Immediately contact the mortgage servicer for requirements to enroll in their loss mitigation process; or,
Get mortgage modification through the Home Affordable Mortgage Program (HAMP): https://www.makinghomeaffordable.gov/need-help/Pages/need-help-prepare.aspx

If unemployed, other government programs may provide short-term relief:
*Home Affordable Unemployment Program (UP): https://www.hmpadmin.com/portal/programs/up.jsp

COVID-19 Homeowners Assistance:

For military veteran homeowners, the Department of Veterans Affairs may assist with VA-backed loans and refinancing for non-VA backed loans:

A reverse mortgage may be a preferred option for older homeowners. However, there are risks. The Federal Trade Commission talks about some of the benefits and risks: https://www.consumer.ftc.gov/articles/0192-reverse-mortgages

Walk away and Start Over

If you feel it would be best to walk away from the home, then a short sale or deed-in-lieu of foreclosure may be your best options.

Short Sale

A short sale is the sale of a home for less than the balance remaining on your mortgage. If your mortgage company agrees to a short sale, you can sell your home and pay off all (or a portion of) your mortgage balance. Consider this option if you can no longer afford your home.

Deed-in-Lieu of Foreclosure

With a Deed-in-Lieu of Foreclosure (DIL), you transfer the ownership of your property to the owner of your mortgage in exchange for a release from your loan and payments.

One option for short sale or deed-in-lieu is the Home Affordable Foreclosures Alternative (HAFA) Program): https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp

Be aware that short sales and deeds-in-lieu have risks and you should speak with a professional beforehand.

Options to Avoid Foreclosure When Lenders Are Not Responding to You
The U.S. Housing and Urban Development (HUD) provides hotlines to call when lenders stop working with you, explained in more detail here: https://www.hud.gov/topics/avoiding_foreclosure/workingwithlenders