How Chapter 13 Bankruptcy Stops a Foreclosure Sale
A foreclosure in Florida moves slowly until it does not. The lawsuit can sit for months, then a summary judgment hearing is set, a sale date is scheduled, and a homeowner who thought there was still time finds the clerk’s auction is three weeks away. At that point the options narrow sharply, but one of them, Chapter 13 bankruptcy, can stop the sale outright and provide a path to keeping the home.
The Automatic Stay
The moment a bankruptcy petition is filed, a federal injunction called the automatic stay takes effect. It prohibits creditors from continuing any collection action, including a foreclosure sale. If the petition is filed before the auction, the sale cannot proceed. The lender must stop, and if it does not, it faces sanctions. This is not a delay tactic. It is a legal right that exists so that homeowners have a chance to reorganize.
Curing the Arrears Over Time
What makes Chapter 13 different from Chapter 7 is what happens next. In Chapter 7 the stay is temporary and the lender can eventually resume. In Chapter 13 you propose a plan that pays the missed mortgage payments, plus certain fees and costs, over three to five years, while you resume regular monthly payments going forward. If the plan is confirmed and you make the payments, the lender has no basis to foreclose. At the end of the plan the arrears are cured, and you own the home free of the default.
Lien Stripping a Second Mortgage
Many St. Johns County homeowners carry a second mortgage or home equity line from before the last downturn. If the home is worth less than the balance of the first mortgage, the second is entirely unsecured. In Chapter 13 that second lien can be stripped, treated as unsecured debt, paid pennies on the dollar through the plan, and eliminated at discharge. For some clients this reduces what they owe on the home by tens of thousands of dollars.
What the Plan Requires
Chapter 13 only works if the plan is affordable. You need enough income to cover your regular mortgage payment, the arrears spread over the plan, and your other living expenses. If the numbers do not work, we say so, because a plan that fails leaves you back in foreclosure with less time. In those cases we look at loan modification, a short sale, or a negotiated deed in lieu that avoids a deficiency judgment.
Foreclosure Defense Alongside Bankruptcy
Florida is a judicial foreclosure state, and lenders must prove standing, proper notice, and the amount owed. Defects in the lender’s case can be used to negotiate a modification or buy time before a bankruptcy filing becomes necessary. We handle both the foreclosure defense in state court and the Chapter 13 in the Jacksonville Division of the Middle District of Florida, and we coordinate the two so that nothing is filed before it needs to be.
Contact a St. Augustine Foreclosure Defense Lawyer
If you have a sale date or a foreclosure lawsuit pending in St. Johns County, call Albaugh Law Firm at 904-471-3434 immediately. Visit our St. Augustine bankruptcy lawyer page to learn more.
