The other night, at around 1:00 a.m., I received a voice mail message and e-mail from a frantic potential client imploring me to contact her because she needed to file an emergency bankruptcy case to stop a foreclosure sale on her home.

When was the foreclosure sale? 9:00 a.m. that same morning.

This is a typical scenario every bankruptcy attorney has seen many times. I’m going to go on a little rant here because this is very frustrating for me as an attorney who really wants to help people.

A Foreclosure Sale Tomorrow Is Not An Emergency

The first point I wish to make is that this was NOT an emergency situation.

“What (you might say), could be more of an emergency than this?”

  • You’re working at a factory and the saw cuts off your arm.   That’s an emergency.
  • An earthquake hits and your building collapses.  That’s an emergency.
  • You inadvertently left your child in the car with the windows rolled up in the summer.  That’s an emergency.

You’ll notice something all the above have in common is that they were all unexpected and unanticipated.

With all due sympathy to the above-mentioned woman’s plight (and those similarly situated), she did not learn of this foreclosure sale at 1:00 a.m. the day of the sale.

She didn’t find out about it two days, or even a week before.

In California, the foreclosure process is commenced by the recording with the County Recorders Office of a Notice of Default, which is mailed to the address of the homeowner. Three (3) months must pass after that date before a foreclosure sale date can be published, and that publication must give at least 21 days notice of the sale.

So, our frantic victim here had nearly four (4) months of knowing she faced foreclosure, and waited until literally 9 hours prior to the sale date to seek information on bankruptcy.

In the middle of the night.

How was she even anticipating paying for the attorney’s services and getting papers signed at that hour?

Problems With Emergency Bankruptcy Filings

A while back I wrote about the dangers of waiting too long to file bankruptcy, and likened it to “financial cancer“.   Atlanta attorney Jonathan Ginsburg discusses some of the many reasons that emergency filings are problematic in his article on this subject.

There are so many issues that can arise from filing a bankruptcy this way that listing them all would be impossible, but here are a few:

  • You will have a mountain of paperwork that will need to be filed in a very short time frame after filing, which need to be signed under penalty of perjury.   Inaccuracies in any of these papers, or failure to file them on time, can cause the case to be dismissed, which in turn has its own consequences.
  • The attorney has zero ability to evaluate options, protect your assets if necessary, anticipate problems, or discuss beneficial alternatives.
  • If your case gets dismissed, and then need to refile within a year, you will not have the benefit of the automatic stay (which prevents creditors from taking collection actions against you or your property, such as foreclosure) for more than 30 days in the next case.
  • The cost to do an emergency case is going to be much higher than regular.  How much more depends on what problems arise that are unanticipated or unrevealed to your attorney prior to filing,  and most attorneys will charge extra to do a rush filing because they have to drop all the other cases they are handling to deal with yours.

The list goes on and on, and I realize that anyone who is likely to wait until the 11th hour to file a bankruptcy case isn’t likely to be reading this post far enough in advance to do them any good, but it is ALWAYS best to seek input on your options, whether it be bankruptcy, medical, or anything else, at the first sign of an issue–not after things become critical.

But You Can File Bankruptcy at the Last Minute

Yes, you can stop a foreclosure sale at the last minute by filing your bankruptcy case with the “bare bones” requirements of the petition and list of creditors, thereby gaining the protection of the automatic stay.

There are plenty of attorneys out there who will take your money and file an emergency case for you (I’m not one of them).  But the chances of success in the case are very low by comparison to those where proper preparation time is given.

Perhaps more importantly, by waiting until the last minute, you greatly increase the costs to file the bankruptcy,  are likely merely postponing the inevitable, and you eliminate many possibly superior alternatives for dealing with your problems.

Image Courtesy of KomuNews