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More and more often, Florida foreclosure defense lawyers have the challenge of defending clients against foreclosure on their homes after these clients have already filed bankruptcy.  A lot of times, these clients file bankruptcy to stop a foreclosure based upon their own research or with the help of speedy bankruptcy consultation, without being aware of the ramifications that a bankruptcy filing can have on their foreclosure defense lawsuit. Sometimes, these clients end up in a very bad spot.  Here’s why.

What is Chapter 7 Bankruptcy?

There are different kinds of bankruptcy — you can file under Chapters 11 or 13 of the United States Bankruptcy Code and start proceedings where, under the oversight of a federal bankruptcy judge and a federal trustee, you reorganize your debts.  Here, a “plan” is formed and approved by the court as the Debtor works with the Creditors and the Court to revamp their finances.  No debts are erased here under bankruptcy law.   These are bankruptcy “reorganizations.”

Under Chapter 7 of the federal bankruptcy code, you again place yourself under the oversight of the federal judge, but this time all your non-exempt assets will be inventoried and sold in order to pay your debts. It’s called a “liquidation bankruptcy” and it’s the most common form of bankruptcy filing in Florida and in the United States.

It’s goal is to give you a new beginning, a second chance financially.  As the federal site explains:

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

Many propose that Chapter 7 Bankruptcy is good for those facing foreclosure because:

  1. It stops the foreclosure from proceeding (temporarily);
  2. It may shake money free from other obligations that can then be applied to the mortgage payment; and
  3. It may block tax liability on any foreclosure deficiency.

Filing Chapter 7 Bankruptcy When You Are Fighting Foreclosure on Your Home

The pressures of not having enough money or enough time are heavy and all too real for home owners who are behind on their mortgage payments and already facing foreclosure actions by their lender. What to do, what to do?

Many will get advice from any one of a number of sources that a good strategy is to file bankruptcy under federal law. Chapter 7 of the United States Bankruptcy Code may be applicable to their financial situation: if it is, then filing for bankruptcy may seems like a savvy move.

After all, it’s a federal case that will preempt the state foreclosure lawsuit. The bankruptcy lawsuit, immediately upon being filed at the courthouse, stops (or “stays”) the foreclosure case. It’s almost like a magic wand being waved over the bank, and the relief from that respite can be very needed and very welcome for the homeowner.

However, it’s not a permanent bar. In a few months, say three or four, the lender will be facing the bankruptcy judge asking that the stay be lifted so that the state foreclosure case can proceed.

When the federal judge lifts the stay, your foreclosure relief period is over. The state action resumes.

Larry Tolchinsky’s Tip:

It isn’t the best thing to file a Chapter 7 Bankruptcy Case just to slow down a Florida foreclosure case. Many Florida home owners wanting more time for things like closing a short sale or more negotiation time with the bank may find that a Chapter 7 Bankruptcy filing is very tempting. And it is tempting, that sweet stay of all the state foreclosure proceedings – take that, bank!

However, many of the Florida foreclosure cases that remain on the docket at this point in time are those cases where their files have issues within them — issues that may well mean strong and valid foreclosure defenses for the home owner. These defenses can only be discovered if there is a knowledgeable and thorough review of all the bank’s paperwork, which means forcing them to turn it over (via the formal discovery process) and then preparing the necessary filings to assert the defenses once they have been found.

Things like title issues, appraisal fraud scenarios, and ownership issues can be discovered this way. Foreclosure defenses that can win the case for the home owner – they are out there.

However, all too often a Chapter 7 bankruptcy forces the bank to take notice and to become more aggressive in getting that file closed. Florida foreclosure defense lawyers then get clients coming to them at the eleventh hour — where some defenses have been lost in this sweet stay time delay.

Like the old adage, beware something that sounds too good to be true — maybe Chapter 7 is a good thing for you, but maybe it’s not.


Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

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