Have you been missing payments on your mortgage due to financial difficulties? If you are facing the threat of foreclosure, you’re probably wondering how you can save your family’s home. There are legal steps to delay or even halt property sales instead of voluntarily giving up your possession. Below are the three best options you can consider to prevent the selling of your house due to delinquent payments.
#1 File Bankruptcy
The fastest way to put a stop to a scheduled home foreclosure is to file for bankruptcy. After a bankruptcy filing is submitted, the court issues an automatic stay which will freeze all collection activities of your creditor, including any imminent foreclosure. It prevents your bank from selling your home or collecting property from you as payment for your debt. If you follow the bankruptcy process, you have guaranteed temporary protection on your property until the discharge notice is received.
Can the lending bank make any legal action?
Most probably, banks will file a motion for relief from the automatic stay order. They will try to get the court’s permission to proceed with foreclosing your house. But don’t worry, even with the court’s approval of this motion, you’ll still be able to delay foreclosure for several months. That is enough for you to explore alternatives in saving your property.
What type of personal bankruptcy should you file?
Different types of bankruptcy will help you achieve different goals. If the borrower intends to keep the home, then a Chapter 13 bankruptcy, also called reorganization bankruptcy, is a good option. This helps borrowers save their homes by allowing an opportunity to reorganize or restructure the debt and repay it over a three to five year period under a repayment plan. It is possible to eliminate debts under this bankruptcy chapter.
However, if you cannot pay all debt and to do so causes undue hardship, the better option is to file a Chapter 7 bankruptcy. It won’t guarantee home protection, but it can give debt relief and stall the foreclosure process. Since foreclosure proceedings are delayed, you can file for a loan modification or negotiate with your bank. The best thing that this bankruptcy petition offers is that it can wipe out your mortgage debt liability, which means you don’t have to pay off any balances after a foreclosure.
If you’re declaring bankruptcy to stop a foreclosure, make sure to consult first with an experienced bankruptcy attorney to get the results you’re expecting because any record of previous bankruptcies and your financial situation may limit how long your automatic stay holds. These factors can also affect which type of application you can file in bankruptcy court.
#2 File a Lawsuit Against the Bank
If the lending bank is going after you without following the judicial process, you have the right to file a lawsuit and challenge the company’s actions. However, note that if the sale or foreclosure was judicial (court-approved), this method will not usually work.
Debtors who win their lawsuits usually cite one of the following reasons on why their property should not have been foreclosed.
- The foreclosing bank cannot present a promissory note showing your intent to pay
- The lender did not comply with the requirements for state mediation
- Violation of state law such as the bill of rights for homeowners
- The process of foreclosure was not followed, or there was a grievous error
However, you need to be aware that lawsuits could potentially cost you a lot of money in terms of filing and legal fees. If you fail to win the case, the foreclosure process will continue. So before fighting foreclosure in court, make sure your case has been evaluated by a licensed bankruptcy lawyer. You can get a free consultation from bankruptcy law firms.
#3 Consider Loan Modification
If you want to avoid filing for bankruptcy, you can apply to modify your loan so that you can delay foreclosure. You can also consider foreclosure avoidance since it will prevent your bank from doing dual tracking. This means your bank cannot continue with any foreclosure if there is a pending application for the mitigation of loss.
What happens if your loan restructuring proposal is approved? The foreclosure will permanently stop subject to your continuance of payment under the modified plan. Depending on your state, dual tracking of foreclosures may be prohibited. If this is the case, then the servicer should either decide to deny or grant the first-lien application for loss mitigation before the process of foreclosure. You should consult with a legal expert to determine the proper deadlines for applying.
If you can apply for loss mitigation before the set deadline, then the federal law prevents your servicer from making a foreclosure judgment or order of sale until certain conditions about the mitigation or trial modification are met.
The best way to have your application for loss mitigation considered is to be current on your loan. However, if all else fails, you can still try to request if your servicer can postpone the sale.
Is it time to Consult an Attorney?
You don’t have to constantly fear losing your home. It is highly recommended that you look into foreclosure or bankruptcy attorneys who can explain the legal options you can take to stall or stop foreclosure. If you want to know more about how bankruptcy filings prevent foreclosures or the process for filing bankruptcy, consult with E. Orum Bankruptcy. Our bankruptcy lawyers can provide you bankruptcy information you may need – from bankruptcy cases, debt-settlement, payment plans, and many more. Call us and get started with regaining your financial freedom today.