Florida Chapter 13 Bankruptcy
If your income exceeds the median income amount allowed for a chapter 7 bankruptcy; you have a valuable asset, or you wish to save your home, you would need to file a chapter 13 bankruptcy.
While you must repay your debts according to your ability to pay, chapter 13 allows you to restructure your car or other secured debt payments, eliminate second mortgages, and restructure your mortgages on homestead or investment properties. Chapter 13 is often recommended if you are facing foreclosure of your home.
Saving your house
If you have fallen behind on your mortgage, there are three options available to you in Chapter 13 to save your house.
1.) Modify your mortgage
Homeowners can modify their mortgages on their homestead property in a chapter 13 bankruptcy. The homeowner must begin the process by proposing a monthly mortgage payment of 31% of gross household monthly income.
2.) Stop foreclosure by paying off arrears amount
Alternatively, homeowners may pay back their accrued arrears on homestead or investment property over 36 – 60 months. A homeowner or investment property owner may choose this option if he wants to wait until the home value increases to sell it.
3.) Strip second mortgage
If you owe more on your first mortgage than the value of the house (determined by an appraisal), you may strip (wipe out) the second mortgage entirely in a chapter 13 bankruptcy! You may do this in addition to either modifying your mortgage or paying off your arrears.
Walking away from your house
You may have decided to give the house back to the bank. This is sometimes a wise decision, but be aware that the bank may obtain a deficiency judgment against you and then attempt to collect the difference from your personally or file a 1098/1099 with the IRS, and treat the deficiency amount as earned income. A bankruptcy will protect you from the deficiency judgment and the 1099 taxable gain and may be filed even prior to the foreclosure sale.
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