Bankruptcy Stops Foreclosure and Allows You To Save Your Property
Bankruptcy Chapter 13 and Chapter 11 can stop a foreclosure and allow the opportunity to catch up on past due mortgage payments, do loan modifications, refinances, and more, all without having to worry about a sudden loss of ownership of your property.
But, sadly, many people leave bankruptcy as a last resort when trying to work things out with their lenders, often to the point where it’s too late to save things through bankruptcy.
Once a Sale Date is Set, Your Home Can Be Sold at Any Time Outside of Bankruptcy.
My clients are a trusting bunch.
Many try very hard to prevent foreclosures on their homes and other properties by applying for loan modifications with their lenders.
In California the foreclosure process starts with the lender recording a Notice of Default and then, usually 3 months later, publishing a Notice of Sale (foreclosure).
Those who are on top of this will contact the lender in the hopes of working something out.
Nothing wrong with that–makes sense.
They are told repeatedly that their foreclosure sale will be postponed while their application is processed. No need to worry.
They are told that their application is actually being processed.
They are told that they are approved for a loan modification.
Sometimes the above statements are true. But often, they are not.
The sale date is typically postponed in one week increments and, unless the foreclosing lender voluntarily continues to postpone it, the sale will take place–without any further notice to the owner!
And, often times loan modifications simply are never approved.
See more on the California foreclosure process
I just had a very smart gentleman in my office whose situation is instructive and illustrates the problem with blindly believing what the mortgage company representative (who may not even be there tomorrow) tells them.
How Bob Lost His Home
Bob (not his real name) recently lost his home to foreclosure.
Bob is a financial professional, and a smart one at that. I point this out because these type of “trust” issues aren’t reserved for the less savvy people out there.
He had been in negotiations with his mortgage holder, a large national bank, for a loan modification and to resolve certain disputes regarding charges the lender deemed were owed.
A foreclosure sale date had been pending, and had been continued several times.
Bob figured he was safe continuing the process until it was completed.
Bob was wrong.
The lender foreclosed without any new notice to Bob, and Bob lost a property in which he had over $1 million in equity.
Bob could have filed a Chapter 11 case and avoided the foreclosure possibility while continuing to negotiate for the loan modification, but he decided to trust the mortgage company instead.
Now, instead of cruising through a bankruptcy case, Bob is trying to find a way to undo the sale, which is virtually impossible.
Should You Seek Loan Modification or Contact a Bankruptcy Attorney?
Most people don’t have over $1 million in equity like Bob, but the analysis is no different for anyone else.
If your home is being foreclosed, it’s fine to contact the bank to start a process for resolving that issue, but your next phone call should be to a bankruptcy attorney to at least explore your options and at least be PREPARED to file a bankruptcy if necessary.
Otherwise, if you wait and trust your mortgage lender, you could wind up losing your property without any way to get it back, or wait too long for a competent bankruptcy attorney to process and file a Chapter 13 or Chapter 11 case for you.
Image courtesy of Mike Baird