Foreclosure Relief

The threat of losing your home can be terrifying.  If you are unable to keep up with your mortgage payments, you want to find a way to avoid home foreclosure.  It is easy to feel helpless in a situation like this, but the right lawyer can help you save your home using a number of legal options, including Chapter 13 bankruptcy.

What is Foreclosure?

When a homeowner defaults by failing to make payments on his or her mortgage, the lender that holds the mortgage note may foreclose on the property.  Foreclosure is the process whereby your lender sells your home to pay off the loan it made to you.  Without foreclosure, it could take the bank many months, even years, to obtain a judgment and force the sale of your home.  Accordingly, California law provides for an expedited procedure through which a lender can get paid in the event a mortgage is not kept current. 

California Foreclosure Process:

The primary method of foreclosure in California involves what is known as non-judicial foreclosure.  This type of foreclosure does not involve court action.  A lender typically initiates the foreclosure process when the homeowner is several months behind on the mortgage.  Foreclosure proceedings generally start with the lender recording and mailing a document entitled, "Notice of Default and Election to Sell under Deed of Trust."  The lender must then wait 90 days before it can publish a sale date, which is set forth in a document entitled, "Notice of Trustee's Sale."  The sale date must be at least 20 days after the initial publication of the sale.  So, it takes approximately four months to complete a non-judicial foreclosure.  During the foreclosure process, homeowners have numerous options, which are discussed below.  However, time is of the essence, so those facing foreclosure should act quickly.  Call KM Law Group today at 866-500-3838 to schedule a free consultation to discuss your specific situation.

Solutions to Foreclosure:

There are various potential solutions ways to resolve an impending foreclosure.  The most important point to remember is that time is of the essence in avoiding foreclosure.  Specifically, you need take action early in the process before you run out of options.

Pay the Delinquent Amount (also known as Reinstatement)

The most basic solution is to repay the delinquent portion of the loan and get caught up with your lender.  TheCalifornia Civil Code provides that the total amount which is delinquent can be paid at any time up to five business days prior to the date first scheduled for the foreclosure sale.  Many lenders will even accept payment during that last five-day period, but don't always count on this happening.  The amount which must be repaid is all of the delinquent payments, plus late fees, plus any interest due, plus any foreclosure fees and associated costs.  You should contact the trustee to inquire as to the full amount necessary to cure the default.

Negotiate

Another option is to attempt to negotiate some form of repayment plan with the lender.  Occasionally your lender may agree to defer a few payments that will become due at the tail end of your loan.  However, all negotiations are solely at the discretion of the lender.  Many people ask whether a lender will reduce the total amount due or permanently reduce the monthly payments.  While anything is possible, these are the least likely things that a lender will typically be inclined to do.  However, in light of the recent downturn in the economy and falling property values, lenders might be more inclined to discuss a modification of the mortgage. 

Sell/Short Sale

Another solution is to sell the property.  If escrow is closed on the property prior to the foreclosure, then there is no need for a foreclosure in that the loan will be paid in full.  If you have equity in the property, you may end up walking away with money in your pocket.  If the property is upside down (meaning the property is worth less than what you owe), you still may be able to sell the property by doing a "short sale."  This means that the lender voluntarily agrees to accept less than the full amount due.  A lender may agree to go along with a short sale as it is usually better for them to have their money now as opposed to going through foreclosure and then reselling the property as this could take many months.  If you choose this solution, you should choose a real estate agent who has experience in short sales.  Should you choose to explore this option, we are more than happy to refer you to an experienced realtor.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is an option that allows a debtor to discharge certain liabilities, such as credit card debts, personal loans, etc.  Although Chapter 7 bankruptcy does not help a debtor reorganize, or otherwise catch up, on his/her mortgage payments, the filing of bankruptcy invokes an "automatic stay," which typically delays the foreclosure process a couple months, sometimes longer.  By delaying the foreclosure process, and by discharging other obligations, many homeowners are able to save their homes.  Alternatively, if a debtor does not wish to keep his/her home, he/she may still benefit from the extra time that the bankruptcy filing will provide.

Chapter 13 Bankruptcy

Another alternative is to file Chapter 13 bankruptcy.  In a Chapter 13 bankruptcy, any delinquent amounts can be repaid over a three or five year period.  The lender has no choice but to accept this repayment plan.  Of course, any mortgage payments which become due after the filing of the Chapter 13 bankruptcy proceeding must also be paid.  If a person has the financial ability, this is as excellent solution in that it requires a lender to take a repayment over period of time.

Chapter 13 Bankruptcy (With 2ND Mortgage Removal):

Depending upon individual circumstances, a debtor in a Chapter 13 bankruptcy may be able to remove his/her second and/or third mortgage loan.  Specifically, the debtor must be able to prove that his/her home is worth less than the amount owed against the balance owed on the first mortgage.

Deed in Lieu of Foreclosure

If a homeowner wants to avoid a foreclosure sale, he can simply transfer the property back to the lender by executing a "deed in lieu of foreclosure."  This process, often referred to as a "friendly foreclosure," does adversely impact one's credit.

Walk Away

Lastly, you may simply choose to allow the property to go via foreclosure.  You will have the opportunity to live in the property, free of charge, up to the time of the foreclosure sale.  After the foreclosure sale, you may face eviction proceedings and may be charged a reasonable rate of rent during that period of time.  This is the reason that we usually advise clients to vacate the premises as they get closer to the sale date.

Conclusion

Foreclosure is an extremely serious matter.  A lender can sell your home in a very short period of time.  It is for this reason that some action needs to be taken immediately when a Notice of Default is filed on your property.  The worst thing that you can do is delay.  The longer you wait to take action, the more likely you will have less options or no option at all.