Florida Mortgage Modification Lawyer Blog

This is a question that gets asked ten times a day around here, and the answer is: If you received a discharge in a bankruptcy case in which you surrendered a piece of real estate, then you don’t HAVE to do a short sale in order to rid yourself of the mortgage debt associated with that real estate. However, there are several other factors to consider that just may convince you that a short sale is still in your best interests.

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If you are one of the many Floridians that took out a second mortgage during times when home prices were on the rise, this entry is for you. I have met with many homeowners, especially in Southwest Florida, that are paying on two or more mortgages when their home value does not exceed the first mortgage. In these circumstances, a Chapter 13 bankruptcy may be able to help.

In a Chapter 13 bankruptcy, where the value of the home does not exceed the first mortgage, a Motion may be made to declare the second mortgage an unsecured non-priority debt, placing it in the same position as a credit card or other unsecured non-priority debt to be discharged. For example, where a home has a current value of $100,000, with a first mortgage balance of $150,000 and second mortgage value of $50,000, subsequent to the filing of a Chapter 13 bankruptcy petition, a Motion may be made to “strip” the $50,000 second mortgage, relieving the homeowner of that debt, allowing the homeowner the opportunity to focus on paying the first mortgage.

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A Florida homeowner can walk away from a home, but will face foreclosure. This decision should be considered very carefully. Why?

Florida Foreclosures are starting to take a turn for the worst. In Florida, once a home is sold on the Courthouse steps, the lender must apply the monies received from the purchase to the balance of the loan. When I first started practicing law, deficiencies were unheard of, as home prices consistently went up; however, as we all know, those days are memories.

Now, it seems that all the homes being sold on the Courthouse steps are for less than the outstanding balance. Once the lender applies the proceeds of the sale to the outstanding balance, the borrower could be responsible for the remaining deficiency.

In the last two weeks, I've seen several lenders, mortgage companies and banks starting to pursue deficiencies against the former homeowners.

More on this later.....

Continue reading " Florida Foreclosure - Can I Walk Away From My Home? " »