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FILING
BANKRUPTCY STOPS FORECLOSURE
We
stop foreclosures all the time. Let me repeat
that. We stop foreclosures all the time.
As
you know, foreclosure is what mortgage lenders
start when you get too far behind on the
mortgage you have on your home or other real
property.
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FILING BANKRUPTCY CAN SAVE
YOUR HOME!
I
am behind on my payments. What can filing
bankruptcy do for me?
It
may be able to save your home. The big
question is this: If you were up-to-date on
your mortgage now, could you keep up-to-date?
If so, filing bankruptcy...and specifically
filing bankruptcy under Chapter 13....could
well save your home or that other piece of
real property.
You
see.... immediately....when you file a Chapter
13 bankruptcy, your mortgage lender must stop
any pending foreclosure.
However...and this is
important... this assumes you file bankruptcy
before the final foreclosure deadline.
What
do we mean by final foreclosure deadline?
You
don't have forever. You have to file
bankruptcy while there is still a foreclosure
to stop. For instance, in North Carolina, the
final foreclosure deadline is the 10th day
after the foreclosure sale. In North Carolina,
for instance, the 11th day after the
foreclosure sale is too late.
I
don't live in North Carolina? Does that make a
difference?
Absolutely.
How long you have to file bankruptcy and still
stop a foreclosure proceeding is a matter of
State law. That is, it all depends on the
foreclosure laws of your State.
How
do I find out for my State?
If
your home or real property is in
foreclosure...even if there is a threat of
foreclosure...contact an experienced
bankruptcy attorney...and do it now. You have
nothing to lose. Most experienced bankruptcy
attorneys offer a free initial consultation.
Don't wait. Call and set up an appointment
with a bankruptcy attorney. Whatever you
do...don't get advice from your mortgage
lender.
What
happens after I file a Chapter 13 bankruptcy?
Assuming
the plan is to save your home or other real
property, once the case is filed, you start
making your regular mortgage payments
again...as they come due. Sometimes, the
future payments are included in your Chapter
13 plan. Sometimes, you have to make them
directly to the mortgage lender.
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PAY
BACK OVERDUE MORTGAGE PAYMENTS
OVER TIME...IN LOW....EASY...PAYMENTS
What
happens to the mortgage payments I am behind
on?
Good
question. In Chapter 13, we set up a plan of
repayment for you, and one of the things you
have to pay is all the money that you are
behind on with respect to your mortgage.
That's the bad news. The good news is that you
are generally given many months to do so. For
instance, in North Carolina, in most cases,
you can spread this payment out over the
entire duration of your Chapter 13 plan, which
is anywhere from 36 to 60 months, depending
upon your circumstances. Let's say you were
$3,000 behind in your mortgage payments before
filing bankruptcy under Chapter 13.
And...let's say your Chapter 13 plan is set up
to run for 48 months. In most cases, you can
pay back the $3,000...without interest or
additional late fees...by paying $62.50 per
month ($3,000 / 48 = $62.50).
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WHAT
IS FORECLOSURE?
Tell
me more about foreclosure. What exactly is
foreclosure?
If
you will remember, way back when you got your
mortgage, you signed 2 documents. You probably
signed a lot more than 2 documents, but the 2
documents I am speaking about were the Note
and the Mortgage (called a Deed of Trust in
North Carolina.) The Note was your personal
promise to pay for the money you borrowed from
the mortgage lender. The Mortgage was your
agreement to serve up your home or other real
property as "collateral" for the
loan. By doing so, you allowed the mortgage
lender to put a lien on your real property.
"Foreclosure"
is the court proceeding which your mortgage
lender starts for the purpose of selling your
real property. The mortgage lender then
applies the money from the sale of your
property toward payment of your debt.
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UNDERSTANDING
HOW FORECLOSURE WORKS?
So,
how does foreclosure work?
Foreclosure
is handled somewhat differently from State to
State, but using North Carolina as an example,
here is how it works. When you get far enough
behind....usually about 3 months....on your
mortgage, to the point where your mortgage
lender has reason to believe that you either
can't or won't pay your mortgage, the mortgage
lender starts foreclosure. This is a court
proceeding.
However, before doing so, you will usually get
one or more demands for payment. If you still
don't pay and catch up your mortgage, the
mortgage lender will turn the matter over to
an attorney who specializes in handling
foreclosures. That attorney will sometimes
write you to give you one last chance to catch
up your mortgage. Then, you will be sent a
letter that tells you that the mortgage lender
is exercising its right to
"accelerate" your mortgage, which
means it is exercising its right to declare
your entire mortgage due...as opposed to just
your delinquent payments. In North Carolina,
this is a necessary step before the mortgage
lender can start foreclosure. At this point,
the mortgage lender will generally refuse to
take any partial payments from you because the
mortgage lender does not want to do anything
to accidentally "waive" its rights
to proceed with foreclosure.
After
this is done.....in North Carolina.....there
are 3 major steps included in the foreclosure
process. First, you have to be served with a
Notice of Foreclosure Hearing. The purpose of
this hearing is for the mortgage lender to get
permission to sell your real property. This
hearing is usually just a formality, because
in most cases, there is no question that you
are behind on your mortgage payments, and
showing that you are behind is usually all the
mortgage lender has to show. Once the mortgage
lender gets the go-ahead to put your real
property up for sale, the mortgage lender, by
its foreclosing attorney, then posts and
publishes a Notice of Foreclosure Sale. A copy
of the Notice of Sale must be served on you,
and...in North Carolina...this gives you about
20 days advance notice of the sale.
The
sale is then conducted in a public place.
Anyone interested in buying your property
comes to the sale and bids on your property.
This highest bidder gets your property. After
the bidding is concluded, the highest bidder
must then pay....as a down payment...a deposit
in the amount of 10% of the bid price.
After
this, there is a 10 day waiting period, called
the "upset bid period", during which
you are given a chance to pay off the entire
mortgage (which almost never happens), and
other people are given a chance to post higher
bids for the property. In most cases, no
higher bids are posted. Assuming this is the
case, the sale is considered final the end of
the 10 day upset bid period.
Once
the sale is final, the highest bidder pays the
rest of the bid price, and receives from
foreclosing attorney a deed which conveys...
to the highest bidder.... title to the
property.
The
money received from the highest bidder is
first applied to pay any outstanding real
property taxes, and then it is applied toward
payment of your debt with the mortgage lender
and...if there is enough money....the costs
involved in preserving the property and
processing the foreclosure. In almost 100% of
the foreclosure cases, the amount bid is not
enough to pay off all these costs.
After
my house is foreclosed, how long is it before
I have to move out?
We
will use North Carolina law to answer this
question. In North Carolina....after the
foreclosure is complete, someone checks to see
if you are still living in the property. If
you are still there (and you have NOT filed
bankruptcy), the buyer of the property gets
the Sheriff involved. The Sheriff would then
serve you with a "Notice to Quit"
the property, which requires you to vacate the
property within so many days. If you don't
vacate within that time, the Sheriff comes and
physically throws you out, along with your
family and all your belongings. You are
literally put out on the street.
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DEALING
WITH THE MORTGAGE DEFICIENCY
Assuming
the foreclosure does not bring in enough money
to pay off my debt with the mortgage lender,
what happens to unpaid part?
Well...that's
where the Note comes in. Remember the Note
your signed at the closing. That Note....in
essence....pledged you as collateral for the
loan. Very simply....you still owe whatever
part of the debt is not paid through the sale
of your property. This is generally referred
to as a "mortgage deficiency". In
most cases, the mortgage lender will try to
collect upon this Note obligation by suing you
personally and taking a judgment against you.
How
much can I expect the unpaid part to be?
Every
foreclosure sale is different, but the harsh
reality is that a foreclosure sale almost
never brings anywhere near as much money as
when you sell your property through a licensed
real estate broker. As a result....we many
times see mortgage "deficiencies" of
$20,000 to $50,000 or more. How much the
deficiency is depends on what your real
property was worth, and how much value...if
any....there was in your property above what
was owed on your mortgages. For instance,
let's say your house was worth $170,000 in the
hands of a real estate broker, but only sold
for $120,000 at a foreclosure auction.
And...let's say you had 2 mortgages against
it, one for $140,000 (including your past-due
payments and the costs of foreclosure), and a
second mortgage for $30,000. In this example,
after foreclosure, you would still owe $20,000
on your first mortgage loan and $30,000 on
your second mortgage loan, for a total of
$50,000.
Can
filing bankruptcy help me get out from under
this mortgage "deficiency"?
Absolutely. The bad new is that you owe it.
The good news is that this debt is "unsecured"
and...most of the time...by filing bankruptcy
you can get rid of most...if not all... of
this debt. In our example, that may mean
getting rid
of $50,000 in debt...plus all the future
interest.
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DON'T
WAIT...GET THE HELP YOU NEED...NOW
When
should I come to see an attorney about filing
bankruptcy?
If
your house is in foreclosure or about to
be....the answer is now, immediately,
today. The sooner the better.
The earlier you are in the process of
foreclosure or threatened foreclosure: (1) the
more options you have, (2) the quicker you
will find out what your options are, (3) the
less the foreclosure expenses the mortgage
lender will have incurred and...in turn... the
less you will have to pay back, (4) the more
time there is to figure out if filing
bankruptcy is right for you, and if so, the
more time there will be for getting all the
documents properly prepared to effect your
filing.
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BUY
MORE TIME IN YOUR HOME
I'm
still living in my house, but what if I can't
afford to keep up the payments? What can
filing bankruptcy do for me?
Sometimes,
there just isn't enough income to continue to
afford your home, as for instance where you
have lost your job or where you and your
spouse have split up.
In
this event, filing bankruptcy before the final
foreclosure deadline can at least buy you more
time in your home. Filing bankruptcy is like
throwing a net over the mortgage lender. You
see, when you file bankruptcy, the Bankruptcy
Court immediate issues a court order that
tells all creditors to stop in their tracks
until they are given permission by the court
to do otherwise. The net is this Court order,
and what happens is that your mortgage lender
has to stop the foreclosure....until it gets
permission from the court to continue. Even if
the mortgage lender responds as fast as
possible, as long as the foreclosure was not
final at the time you filed bankruptcy, filing
bankruptcy will buy you an additional 30 days
in your home. In most cases, it works out to
another 2 or 3 months, or more.
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BUY
MORE TIME TO GET YOUR HOUSE
SOLD THROUGH A REAL ESTATE BROKER
In
addition, by filing bankruptcy before the
final foreclosure deadline, you can stop the
foreclosure, and if there is enough value in
your house to justify selling it, you can buy
some time to try to get it sold through a real
estate broker. Remember, selling your house
through a real estate broker almost always
brings more money that having it sold at a
foreclosure auction. Filing Chapter 7
will buy you 3 or more months. Filing
Chapter 13, especially where you agree to
pay some "adequate protection" payments to
the mortgage lender, can buy you 6 months to
a year, depending upon the facts of your
situation and the State that you live in.
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GETTING
RID OF CERTAIN 2ND OR 3RD MORTGAGES
How
else can filing bankruptcy help me with
respect to may house?
Sometimes...we
can completely strip off and get rid of a 2nd
or 3rd mortgage. Under the law, if your file
bankruptcy under Chapter 13, you have a right
to strip off any mortgage that is completely
"unsecured". For instance, say your
house is worth $100,000, but you owe $110,000
on the first mortgage, and another $30,000 on
a second mortgage. By filing bankruptcy under
Chapter 13 (and this assumes you stay in your
case to completion), you could...in this
example...strip off the second mortgage
completely. And...let's say your mortgage
payments on the second mortgage are $350 per
month. This would save you $350 per month.
This might be the difference between keeping
your house and making it, on the one hand, or
not filing and losing everything.
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WHAT
ABOUT REFINANCING TO AVOID FORECLOSURE?
I
am behind in my mortgage payments and the
foreclosure has already been started. Is it
too late to hire a mortgage broker to try to
refinance my house?
It
probably is too late. First off, in our
experience, if your situation is so far gone
that you are already in foreclosure, there is
little likelihood that a mortgage broker can
help you, and this assumes that the mortgage
broker isn't just leading you on to make a few
bucks at your expense. The biggest problem is
that every day you delay getting in to see an
experience bankruptcy attorney is another day
closer to whatever final foreclosure deadline
applies in your State. Don't take a chance. If
you house is already in foreclosure...even if
you are working with a mortgage broker...even
if the mortgage broker sounds promising...make
an appointment to go see an experienced
bankruptcy attorney. You have nothing to lose
and everything to gain. Give yourself a backup
plan...just in case the refinance does not
come through as hoped.
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Call today for a FREE
Consultation!
Just call toll free
1-800-899-1414.
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