New Florida Foreclosure Statute May Limit Bankruptcy Protection Options

  On May 28, 2008, Florida Governor Charlie Crist signed into law Florida Statute 501.1377.  The legislative history behind this law suggests that it was designed to protect Florida residents from scam artists who prey on desperate homeowners facing foreclosure.  With home delinquencies on the rise, delinquent Florida homeowners have been ripped off by individuals offering to stop foreclosure in exchange for a fee.

  Under this law, any “foreclosure rescue consultant” must enter into a detailed fee agreement with the homeowner and the homeowner has four days to rescind the contract.

  Further, the foreclosure rescue consultant may not collect a fee until after all services are completed.

  A prior version of this bill removed attorneys from the definition of foreclosure rescue consultants.  However, the final bill did not contain this change, so attorneys are considered foreclosure rescue consultants.

  Several Florida law commentators note that the practical effect of this law could be to prevent Florida homeowners facing a a foreclosure from retaining counsel.  For example, Jacksonville bankruptcy lawyer Chip Parker, writing in the Bankruptcy Law Network blog, notes that no bankruptcy lawyer would file a Chapter 13 bankruptcy if he could not be paid through the Chapter 13 plan, and had to wait five years before collecting any fee for his work.  Dade City Attorney Michael Wasylik also writes about this pending Florida statute and expresses the hope that the legislature will fix this obvious problem before the effective date of the law. 

  Clark and Washington will monitor the status of this new law and we’ll keep you posted here as well as on the pages of our Tampa Bankruptcy blog.

  Until we know more, however, we urge you to contact our our office for legal advice as soon as you recognize that you are facing a possible mortgage problem.

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