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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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I have a 1st mortgage on my home which is upside down by 100k.

Resolved Question:

I have a 1st mortgage on my home which is upside down by 100k. I reside in Florida. I was informed by another attorney that if I dont short sale my home and file Chapter 13 instead I could surrender my residence and walk away with no outstanding residential debt. I have not made a payment on my home for 6 months. I have no other outstanding unsecured debt. Today I was informed by a friend that talked to another attorney that if I file chapter 13 and my payments are not up to date or current that the bank could come after me for the payments not made and considered unsecured debt, IS THIS TRUE considering I will surrender this asset through chapter 13?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 7 years ago.
Hello,

When a property is foreclosed in Florida, a judgment can be entered by the court for any amount of the loan that remains unpaid. This is called a deficiency judgment. The deficiency judgment can be used to execute on other property held by the debtor.

To avoid or minimize the deficiency, a borrower will need to convince a lender that a modification to allow a short sale or more affordable payments will mitigate the lender's losses. For this reason it is necessary for the property owner to show the lender that the property would not yield the amount of the mortgage in a foreclosure sale, that the owner cannot pay the current payments and that the owner would be able to pay a reasonably lower interest rate or obtain a short sale at a more favorable price than a foreclosure sale.

To clarify, there are three prongs to convincing the lender that a modification will mitigate the lender's losses:
1. Convince the lender that the property would not yield the amount of the mortgage in a foreclosure sale,
2. Convince the lender that the you cannot pay the current payments - show the lender that there are no other assets available to pay a deficiency.
3. Convince the lender that you would be able to pay a reasonably lower payment or short sell at a more favorable price than a foreclosure sale.


I hope that this helps you.
Customer: replied 7 years ago.
Loan modification is no option at this point so Chapter 13 is being considered. I will file Chapter 13 and surrender this asset and debt. If I file chapter 13 and my payments are not up to date or current could the bank could come after me for the payments not made and be considered unsecured debt, IS THIS TRUE considering I will surrender this asset through chapter 13?
Expert:  Ellen replied 7 years ago.
I think you may be confused between a chapter 7 and a chapter 13.

A chapter 7 bankruptcy could allow you to surrender the house without further payments.

I will explain.


As an individual, there are two types of bankruptcy available. A Chapter 7 and a Chapter 13. There are distinct differences in between a Chapter 7 and a Chapter 13 bankruptcy.



A Chapter 7 bankruptcy could discharge (erase) all of your unsecured debt such as credit cards, judgments and personal loans. It would be an opportunity for a fresh financial start. However, you may have to surrender assets, if any, that exceed your exemption.



A Chapter 13 bankruptcy is a repayment plan for an individual. It may require that you repay some of your unsecured credit card debt over a 3 -5 year period. However, you may retain assets that exceed your exemption.


Here are the exemptions for Florida:
http://www.bankruptcyinformation.com/FL_exemp.htm



Best wishes for a successful outcome. If you have additional questions, please do not hesitate to submit them to me directly.


Thank you,
FLAandNYLAWYER
Ellen and other Bankruptcy Law Specialists are ready to help you