Bankruptcy Lawyer Bryan Stone answers the question: “Can I keep my house if I file bankruptcy?”
There’s been a recent push by some legislators to further reform the bankruptcy process. The argument is that the system has too many loopholes that can be exploited by those eager to game the system. Though the overwhelming majority of bankruptcy filers are honest and only move forward with seeking bankruptcy protection as a last resort, it is true that occasional bad apples can be used to spoil the bunch. One example of a bad apple is a man from Florida who spent more than a decade using the bankruptcy system to live rent free by continually putting off foreclosure attempts.
Foreclosure is a process that occurs after a homeowner falls behind on his or her mortgage payments. The bank (or debt holder) uses foreclosure as a tool to seize the home from the debtor and sell it at auction to get payment for the loan. The foreclosure process thankfully does not happen overnight and requires many steps before a person loses his or her home. Lenders typically won’t begin the process until a homeowner misses several payments.
What’s a stay?
When you file for bankruptcy protection, whether it’s a Chapter 13 or a Chapter 7, the court hearing your petition will grant what’s known as an automatic stay. This can be a huge relief for most filers, as it forces all of your creditors to stop any collection activities immediately. Any failure on the part of the creditors to cease such activities can lead to serious punishment. While this is normally used to stop credit card companies from harassing debtors, it can also be used to freeze attempts to foreclose on a home.
How does a stay help with foreclosure?
It’s important to note that an automatic stay does not prevent foreclosure from happening. For that to happen, you’d need to go through the bankruptcy process and restructure your debts, working out a plan in conjunction with the lender. The automatic stay can help to postpone foreclosure. When you file for bankruptcy and an automatic stay is issued, the foreclosure process will immediately grind to a halt, with the sale being postponed while the bankruptcy petition is pending. This can buy you time to restructure your debts or decide how best to move forward. Debtors eventually run out of time when creditors file motions to lift the stay. When this happens, the protections afforded by the stay are removed and actions (including foreclosure) can proceed.
What did the Florida man do?
Back to our friend in Florida. News reports indicate that the man realized the benefit of this automatic stay and repeatedly filed for bankruptcy to prolong the protection. Between 2002 and 2013, he managed to live in his home rent free, filing for bankruptcy 15 different times in that period. Even though none of these petitions was ever granted, he fell through the cracks and would follow each unsuccessful attempt with a new application. Finally a judge caught on in 2013, dubbing the man a “serially abusive filer” and barred him from filing for 2 years. The two-year period recently ended and, to no one’s surprise, the man has already filed another petition, this time attempting to remain in a rental property where he hasn’t paid rent in four months.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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