Florida Foreclosure and Florida Bankruptcy: Two Trains On Different Tracks – More to Consider Before Filing Bankruptcy to Halt Florida Foreclosure

Posted By on September 10, 2013

Last Update: 02/24/16

Filing bankruptcy as a foreclosure defense strategy here in Florida may or may not be a good idea (see our earlier post). There’s one factor in this decision now that was not there years ago: time. The glut of Florida foreclosure cases on file in Florida clerks’ offices around the state has bottlenecked courts across the Sunshine State and forced many to turn to the controversial “rocket dockets” in order to try and get the courts running again.

Bankruptcy and Foreclosure Are Two Different Lawsuits in Two Different Jurisdictions

When a Florida home owner considers filing bankruptcy, specifically Chapter 7 bankruptcy, as a means to fight against a foreclosure on the family home, then he or she is considering complicating his or her life in many ways. More litigation. A bankruptcy trustee nosing around in personal matters previously considered private. Having a bankruptcy on their credit record for many years.

And from a practical perspective, filing that bankruptcy will mean that the home owner/mortgage borrower will become the filing party in a proceeding under federal law while being a defendant in a civil foreclosure proceeding under state law. Federal law is different from state law; they exist concurrently in two different “jurisdictions” – federal and state.

The bankruptcy case will be filed, and proceed, at the nearest federal courthouse where bankruptcy cases are filed and overseen. The foreclosure case will be filed in the county courthouse in the county where the property is located.

Two lawsuits. Two jurisdictions. Two courthouses. Two judges.

And two calendars.

The federal bankruptcy courthouse for the Broward County area is located at 299 East Broward Blvd., Room 112, Fort Lauderdale, Florida, in the United States Courthouse for the Southern District of Florida.   Broward County, Florida, by comparison has four different locations that make up the Broward County courts – see the image below for a map linking to detailed information regarding the local court system.

 

Broward County, Florida, has four regional courthouses.

 

Bankruptcy Scheduling and Florida Foreclosure Dockets

With the glut of Florida foreclosures on file right now, things are not moving fast – though they are moving lots faster this summer after all the rocket docket changes in the law.

Still, many Floridians need to understand that while they are parties in two different lawsuits, one does not trump or void the other. The federal bankruptcy will halt the foreclosure proceeding automatically the minute it is filed. This is called the bankruptcy’s “automatic stay.”

That stay can be lifted by the federal court upon the request of the bank – a bankruptcy stay is not an end of the state foreclosure proceeding. The stay just stops all the financial activity of the debtor until the bankruptcy case can get organized and ready to move ahead.

Larry Tolchinsky’s Tip:

Florida home owners may or may not “surrender” or “lose” their home in a Chapter 7 bankruptcy proceeding. Filing the bankruptcy does not equal automatically turning over the house keys to the bankruptcy trustee. Your home will be considered with your other assets, and it will be valued along with your other stuff.

Suddenly, your home and its value and the amount due and owing on the mortgage is a subject of consideration by two courts. The bankruptcy court will be considering these things just as the Florida trial court will consider them.

The trustee, for example, will assess the home’s value versus the debt against it: maybe that trustee will decide that it’s best not to take title to the home and sell it to get money to pay off debts; maybe the trustee will decide it is best to let the homeowner keep title to the property because it is worth so much less in value than the mortgage debt against it (underwater).

Whether or not the home owner continues to live in their home during the bankruptcy case, and until (and if) the foreclosure is granted to the bank, depends upon the situation of the particular home owner.

Just one more reason in these Wild West Days of Florida real estate law, it’s important to have a Florida foreclosure lawyer on your side. Things are far from uniform and there’s no real “normal” right now.

A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to at least talk with a Florida real estate lawyer. Getting someone to review all of the paperwork including the all important promissory note, isn’t as costly as most of us think it is. And it’s always a lot cheaper than paying to fix a problem after a closing occurs.  Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.

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Picture of Larry Tolchinsky

Do you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

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