FORECLOSURE DEFENSE

In today’s economy, many people are struggling to keep up with their monthly mortgage bills.  Foreclosures have been on the rise for the past few years.  In 2008, it was indicated that 2,330,483 properties nationwide entered some stage of foreclosure.  This would amount to an 81 percent increase from 2007 and 225 percent higher than the total number in 2006.

Your strategy and ability to protect your home from foreclosure depends on where you are on the foreclosure timeline.

What is the foreclosure timeline?

STEP ONE

Notice of Default (NOD), Day 0: Once a borrower has missed several months of mortgage payments (generally about three months) the lender will file a Notice of Default with the county recorder. The NOD identifies the default amount and the date by which the borrower must pay off the default. The notice is mailed to the borrower.

STEP TWO

Notice of Trustee Sale, Day 90: Ninety days after the NOD is filed, a lender has the right to file a Notice of Trustee Sale. The Notice of Sale is mailed to the borrower at least 20 days before the sale.  It must contain the date, time and location of the sale and must be posted on the property and in one local public location.

STEP THREE

Trustee Sale Auction, Day 111+: The Trustee sale is held at a public auction at the place and time identified in the Notice of Trustee Sale. The successful bidder receives a trustee’s deed to the property once the sale is completed.

How will bankruptcy stop my foreclosure?

Bankruptcy creates an automatic stay that serves to stop, or put a hold on, all legal actions and proceedings that a debtor is facing. This includes a foreclosure proceeding. To this end, bankruptcy is an intriguing option to many homeowners facing foreclosure, as a mechanism to stop the home foreclosure and eliminate or reorganize their other debts.

The most common and important question we are asked is how long the foreclosure process is stopped for. The answer to this depends on the particular chapter of bankruptcy a debtor will be filing for.

A Chapter 7 bankruptcy, also referred to as “liquidation,” completely eliminates all of a debtor’s legal liability to pay unsecured debt. Unsecured debt includes debt from credit cards, medical bills, and unsecured personal loans. If a Chapter 7 debtor is facing foreclosure, the bankruptcy will temporarily halt the foreclosure process until one of the following occurs: the bankruptcy process is completed, or the foreclosing lender gets the judge to lift the automatic stay. Unfortunately, if a borrower is far behind in their payments, and they do not have enough income to make the payments if the debt is reaffirmed, this relief can be granted immediately.

A Chapter 13, on the other hand, can stop a foreclosure proceeding permanently. A Chapter 13 bankruptcy consolidates debt and reorganizes it into an affordable monthly payment plan approved by the court. In comparison to Chapter 7 bankruptcy, Chapter 13 does not completely eliminate a debtor’s unsecured debt and requires a debtor to repay a portion of or all of the debt. However, the debtor is able to pay off their debt in affordable monthly payments over a period of three to five years, as determined by the court depending on monthly income, expenses, and assets.

A Chapter 13is also referred to as the “Wage Earners” bankruptcy because a debtor must be able to make a reasonable payment on their repayment plan, and stay current on their ordinary monthly payments. However, as long as the debtor remains on the repayment plan and does not default, the foreclosure proceeding will be permanently terminated, and the debtor will come out of the bankruptcy with just their monthly mortgage payments.

Bankruptcy is a very serious step, but will provide debtors instant relief from the foreclosure process. To learn more, please call the Stone Haven Law Group LLC.