A while back I wrote about the perils of waiting too long to file a bankruptcy case (see Dangers Of Waiting Too Long To File Bankruptcy).

One common theme that is becoming ridiculously frequent is people waiting for loan modification approval to save their homes from foreclosure and then contacting a bankruptcy attorney on the eve of foreclosure to try to stop the foreclosure sale.

I cannot emphasize this enough:  This is not a sound strategy.

Prayer and Wishful Thinking Don’t Stop Foreclosures

Folks,  the loan modification process does not automatically stop or postpone a foreclosure sale.   Even where the sale date is postponed, it will be postponed at the discretion of the lender, and your loan modification could be denied today, and the foreclosure sale take place tomorrow.   I JUST received a phone call (it is 10:30 p.m. on a Thursday) from a lady frantic because she just found out her loan modification was denied and the sale is tomorrow at 10:00 a.m.    She has known about the possible foreclosure for a bare minimum of almost four (4) months. When I asked why she waited until now to look into bankruptcy, she commented that she thought the loan modification would be approved.

Wishful thinking and prayer are nice, but not a sound strategy for saving one’s home.

Don’t Expect to File Bankruptcy Over Night

While it is possible to file an emergency bankruptcy case to stop a foreclosure, it is a HORRIBLE way to go about it that is fraught with problems.

First of all, many bankruptcy attorneys (myself included) will not take an emergency case, for a number of reasons.   Period.

Do you really want to be scrambling around at 10:30 p.m. the night before a foreclosure sale hoping you can find a bankruptcy attorney that can process a case for filing?

Do you even have sufficient funds to retain the attorney?

Second, by doing an emergency case, there is absolutely no way for the attorney to properly assess the risks and potential problems of filing a bankruptcy case.   This means that major problems can develop after the case is filed which not only will cost much more in additional attorneys’ fees to address, but could likely cause your plan to fail and your case to be dismissed (in which case the foreclosure sale will proceed anyway, plus you’ll be out the fees you paid to the attorney).

You will also be immediately behind in submitting to the court all the things required to make the case work, which usually takes several weeks to prepare.

It is simply a bad, bad way to deal with the problem.

Planning:  A Better Way To Stop the Foreclosure

Instead of using the prayer/hoping/wishing method of saving your home, I suggest that the moment you receive a Notice of Default on your home** (which in California commences the foreclosure process), you contact a bankruptcy attorney for a consultation.   At that point, there is a minimum of 3-4 months before any foreclosure sale.   The attorney may advise you to go ahead and try a loan modification, but be ready to file a bankruptcy in the event it doesn’t get approved.

Another, even better method in many cases, is to go ahead and file a Chapter 13 bankruptcy case (or Chapter 11 case)  and then seek a loan modification during the bankruptcy.   If it works out, you may be able to dismiss the case, or simply continue it for a much lower monthly payment and get a discharge of debts.

The bottom line is that you shouldn’t risk losing your home by wishing on a star.


**Foreclosure procedures differ from state to state, so contact an attorney in your area regarding the procedures and timing.

Image Courtesy of  TheAlieness Gisela Giardino