If I file chapter 7 bankrupcy can I include my primary residence that is in foreclosure in the bankrupcy?

Asked over 2 years ago - Orlando, FL

I have a friend that was in foreclosure and she filed chapter 7 bankrupcy, her attorney told her that if she included the house in the bankrupcy that it will not be considered foreclosured on. The attorney also told her that even though she was in the middle of the foreclosure and still living in the house that when she filed she would have to leave the property. I always thought that when you filed chapter 7 and did not reaffirm your property and you were already in foreclosure that the bankrupcy would put a stay on the foreclosure proceedings but once it was discharged the foreclosure would resume and until there was a sale date on the property you could remain in the home.

Attorney answers (5)

  1. Margery Ellen Golant

    Pro

    Contributor Level 20

    2

    Lawyers agree

    Answered . Most of the "'advice" you have posted here is completely wrong. For starters, people filing bankruptcy have to include all their debts and all their assets, so that would include the house. However, that does not mean they have to surrender exempt assets.

    You are right in your assumptions about Chapter 7, except that the bankruptcy stay may be lifted sooner than the discharge date if the creditor files a Motion for Relief from Stay. It may be that your friend misunderstood what the attorney told her. Many people fle Chapter 7 who have no intention of surrendering the house. It does not preclude them if doneproperly from litigating over the house and the foreclosure, however it sounds like she will need the services of an attorney who is knowledgable about foreclosure litigation to assist her, since a Chapter 7 does nothing to change the foreclosure situation other than a temporary stay.

    On the other hand, the Orlando Division of the bankruptcy court has a worthwhile mediation program in place in Chapter 13 cases where the homestead real property is at issue. Your friend should not proceed without consulting an attorney who is knowledgable about Chapter 13 and how it would work for her, and who is familiar with the Orlando Division's mediation program.

    Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-... more
  2. Ryan Douglas Caldwell

    Contributor Level 12

    3

    Lawyers agree

    Answered . You asked a lot of questions. The bankruptcy filing institutes the automatic stay which pauses any foreclosure, collection and other actions. The creditor, at any time, and regardless if the Debtor states he will reaffirm or not, can request that the automatic stay be lifted if certain parameters are met, which I won't go into detail here. So the creditor does not have to wait until the conclusion of the bankruptcy case and the issuance of a discharge before continuing foreclosure efforts. You can remain in the property until you are told to leave by the creditor.

    This should not be considered legal advice, but rather simple information. You should consult a lawyer to review... more
  3. Jeffrey B. Lampert

    Pro

    Contributor Level 19

    1

    Lawyer agrees

    Answered . At the risk of starting World War III, I am going to disagree with Ms. Golant's typically detailed and accurate response in one respect--I do not believe that most of the 3 other responses are incorrect. Some things are open to interpretation, use of words.

    Here is the olive branch, I do not believe that your question can be accurately answered in an Avvo-setting. You need to consult with an attorney, face to face, and not rely on 3rd hand information filtered by what your friend believes her attorney told her. That would mean you are relying on the attorney's advise as it was filtered by the capacity of your friend to absorb.

    As noted by one of the attorneys, a bank does not have to wait til the Chapter 7 proceeding is over before resuming the foreclosure process in state court. If a foreclosing bank is well organized, they act quickly, and their attorney uses negative notice in the motion, without a valid objection to the bank getting stay relief [permission from the bankruptcy court judge to the bank to allow the bank to proceed in state court], the bank could start up the foreclosure process in state court within 30 days from the date of the filing of the bankruptcy, even though the Chapter 7 proceeding might last another 2-3 months.

    As noted by one of the attorneys, the time it would take to complete the state court foreclosure process might be many many months. A recent article from a real estate analyst
    estimates that the average time for a foreclosure to take from start to finish to be about 2 years. The creditor getting stay relief does not mean that the foreclosure is a snap-your-fingers over and done matter.

    And, speaking of stay relief in general, there are instances of attorneys objecting to stay relief using the same basis that have been asserted in the defense of the foreclosure, but the difference being that the bankruptcy court judges are not acting under pressure from the legislature to push foreclosures through the Court system. As a result, the rules of discovery and the bank's attorneys' conduct must toe the line when it comes to providing documents, explaining how they were assigned the note and mortgage, ensuring that the proper records custodians are used, and so forth. Or, to put it another way, the bankruptcy judges will not tolerate the game-playing that goes on in state court.

    As I say, a face-to-face meeting with an attorney is essential for you to have a direct and accurate resource upon which to rely when making your decisions.

    I hope you found this response to be of assistance. This response shall not be considered the rendering of... more
  4. Earl David Maxwell

    Contributor Level 12

    Answered . All liabilities must be listed and, hence, are "included in the bankruptcy." Perhaps what is meant is that the home was surrendered in the bankruptcy. The stay can be lifted early as others have described. The owner-debtor has the legal right to stay in the home until title is passed out of his/her name. This usually occurs by court certificate after the bankruptcy is completed and can take several months to years depending on how promptly (or not) the lender proceeds.

    As long as the debtor's name is on the property, he/she MAY be responsible for maintenance (or big fines) by governmental authorities and premises liability even though he/she has vacated.

    Other options to explore with a knowledgeable attorney:
    1) Short sale to remove title from debtors name.
    2) Removal of the mortgage and debt by quiet title if debt was securitized by bank.

    If this answer has helped you, please click below. This communication is intended as general... more
  5. James Portman Webster

    Contributor Level 15

    1

    Lawyer agrees

    Answered . What is said above is only partially true.

    Will it show up on your credit as a foreclosure? Yes. They disclose how they obtained the collateral.

    Can they report missed payments? No.

    Jim Webster
    www.jpwlegal.com

    1845 S. Dobson Rd. Ste 201
    Mesa, AZ 85202

    (480) 464-4667
    Jim@jpwlegal.com

    We are a debt relief agency. We help people file for relief under the Bankruptcy Code.

    Please contact me directly with document for a free 30 minute consultation to get more concrete advice. This is... more

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