During the mortgage crises of 2008 through 2010 many of my clients were desparate to hold on to their homes that were under water and facing foreclosure. Some attorneys began to specialize in the area of foreclosure defense. These attorneys were skilled and delaying bank foreclosure actions during which time the homeowner occupied their home without making mortgage payments.
People who fell behind in their mortgage payments usually had other delinquent debts such as credit card debts. Some of these debtors filed Chapter 7 bankruptcy to wipe out all personal debts including credit cards, car repossessions, and their personal liability under their home mortgage. Debtors who filed Chapter 7 bankruptcy eliminated the fear that their mortgage company could pursue them personally for a deficiency after foreclosure because the underlying mortgage note debt was included in the discharge. The bankruptcy petition stated that the debtor was surrendering their rights in the upside down property to the bankruptcy trustee and bankruptcy estate.
But, even thought he debtor surrendered his rights and equity (if any) to the trustee the debtor did not have to surrender the house possession to the mortgage company The same debtors legally retained full possession of their home until the mortgage lender completed the foreclosure process. A bankruptcy debtor could still retain a mortgage defense attorney to fight and delay the foreclosure without fear of personal legal consequence. As a result, many bankruptcy debtors completed their bankruptcy and then lived in their home for a long time while their mortgage attorney defended foreclosure.
This year, the Florida legislature passed a law to stop delinquent homeowners from fighting foreclosure after surrendering their home in bankruptcy. The Law permits mortgage lenders to introduce in to state court foreclosure proceedings a homeowner’s bankruptcy petition. The bill says that there is a presumption that a homeowner waives all defenses to foreclosure if he has filed in bankruptcy a document evidencing his intent to surrender a property and has received a bankruptcy discharge.
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