Thousands of homeowners each year find themselves in a situation where their home is at risk of being foreclosed upon. They might have missed a few payments or have not been paying the lender for several years. Nevertheless, the bank has officially started foreclosure proceedings, or the debtor has received a notice by the lender of their intent to foreclose. The time between now and foreclosure date is of the essence. You must act fast, and you must act with the right help. Bad advice from a lawyer or a law firm that “specializes” in bankruptcy or foreclosure often leads to unfortunate results. Throughout my phone and in-person consultations, I would estimate that roughly twenty-five percent of the people I speak to who are on the verge of losing their home, are the people who try to negotiate loan modifications on their own or act on bad advice of an inexperienced lawyer and friend who had the “same situation.” These people are typically the ones who end up losing their homes. The following are some Do’s and Don’ts of what to do if you are faced with foreclosure:
Do Not Wait For Loan Modification Approval From the Bank
Most people do not have thousands of dollars to pay the bank in one lump sum to be current on arrears. In a typical foreclosure situation the following unfolds: An individual falls behind on their monthly payments and receives a notice in the mail from the lender of their intent to foreclose. This is the pre-foreclosure stage. The homeowner then goes and hires a law firm, which promises to help negotiate a loan modification or some other resolution of the situation. The law firm takes their legal fees upfront, and assures that that person not to worry and that an approval for the new loan will happen any day now. Days pass and weeks vanish. While waiting for new loan terms to be approved, the homeowner is served with a Summons and Complaint. The bank has officially started foreclosure proceedings in the court of law. What this means is that now you must hire a foreclosure defense lawyer to Answer this complaint, and defend this suit. What this also means is that you must expend thousands of dollars more on the new lawyer in addition to the money you already paid to the first law firm. Waiting on a loan modification to be approved is a waste of precious time. Almost always the lender will file a lawsuit while they are “negotiating” loan terms with you or your representative. Unless you can afford to make one lump sum of all the monies due and owing, you must take matters into your own hands.
Do Speak to Someone
As previously stated, time is of the essence. Every day counts. Do not wait until last minute and hire the first unqualified lawyer you meet, all because you are desperate to latch on to the first person who gives you a glimpse of hope. Through procrastination you minimize all possible avenues. Go on the Internet and find a lawyer on Google, Yahoo, or Bing. Most bankruptcy lawyers handle loan modifications and foreclosure defense as well. You want a lawyer that handles all three areas so that they have no interest in swaying you towards only one possibility when an another could have served you better. Call the local Bar Association in the County you reside and have them refer you a lawyer.
Do Not File for Chapter 7 Bankruptcy Relief
Filing for Chapter 7 bankruptcy when you are faced with foreclosure is pointless. If you are trying to save your home, then Chapter 7 is the wrong path to take. If, on the other hand, you could care less and simply want to delay the process so you can live rent-free for a few more months, Chapter 7 bankruptcy may be the right option for you. In this chapter, the bank may ask that the court allow them to continue with the foreclosure proceedings due to a secured buyer, declining fair market value, or other extenuating circumstances. On a positive note, you will be discharged of any personal liability for any deficiency balance. In the case of homeowners who want to keep their property, be aware that a Chapter 7 bankruptcy only stops the foreclosure for a short period of time. This chapter will not allow you to catch up on past-due payments and force the lender to accept such payments. Once you are officially discharged in a Chapter 7 bankruptcy and your case is closed, the mortgage lender will start eviction proceedings, in which they have all the right to once your home is sold.
Do Pursue a Loan Modification During a Chapter 13 Bankruptcy
A chapter 13 is what will save your home and force the lender to enter into a payment plan under your terms. Most debtors lose their home and get evicted shortly after because they follow bad advice and fail to take appropriate measures right in the commencement of any foreclosure notice to protect their property. A Chapter 13 is not guaranteed. There is always a risk that you will lose your home in this chapter anyway, if you do not make sufficient income (“disposable income”) to catch up on past-due payments and maintain current payments to the mortgage lender as they come due. However, by pursuing only a loan modification or a Chapter 7 bankruptcy, you are limiting your options and chances are you are setting yourself up for failure. Through a Chapter 13 bankruptcy, you can immediately put a stop to all foreclosure proceedings (“automatic stay”), and still continue pursuing a loan modification with the lender. If the bank fails to cooperate, you have all the right to enter into a payment plan with the Bankruptcy Court, in which you can catch up on payments within a five-year span. The bank knows that they have no choice but to oblige by the rules of the court. The issue with proceeding with foreclosure defense outside of bankruptcy is that it can get very expensive. Most lawyers charge on an hourly basis. After the court appearances, hearings, and any pleadings and motions that come due, the legal fee can easily amount to thousands of dollars, without any significant results. After spending all this money trying to enter into a loan modification agreement and defending the lawsuit, chances are that you will still have to file bankruptcy.
Mishiyeva Law- Bankruptcy Lawyer NYC 80 Wall Street New York, NY 10005 (646) 736-6328 kmbankruptcylawyerny.com