Denver Bankruptcy Firm
You will eventually need foreclosure help if you fall behind on your house payments. Your mortgage lender may start a foreclosure action and sell your home at a Sheriff’s sale. If the sale nets less than you owe, there will be a “deficiency balance” that you may owe to the lender. This debt is considered unsecured debt since the lender no longer holds your house as collateral. Filing for Chapter 13 bankruptcy protection stops your mortgage lender dead in their tracks. The day you file your Chapter 13 plan, the court grants you an “automatic stay”, which will immediately prevent the sale of your home.
If you feel you have been taken advantage of or feel your rights have been violated, we are here to help. One of the great advantages of a Chapter 13 plan is that it allows you to get caught up on your mortgage payments over the length of the plan, usually within three to five 5 years. If your home is in foreclosure, you must file for bankruptcy relief before the foreclosure sale date in order to keep your home.
What are my options to avoid foreclosure other than Bankruptcy?
Forbearance and Repayment is the most common way of resolving a loan default. This plan will let you repay part of the delinquency each month, along with your regular monthly installment. If you are temporarily unable to meet your monthly mortgage obligation, your holder may extend forbearance by agreeing to suspend payments for a limited period of time until you are able to begin a repayment schedule. Lenders will usually cooperate as long as you can show that you will be able to resume payments on a specific date in the near future.
- Payment Assistance is also available through state and local governments. In addition, private charitable organizations have programs which will pay all or part of your mortgage obligation for a fixed period of time.
- Re-amortization is an option for some. If your loan is re-amortized, the delinquency is added to the loan balance in order to bring your payments up to date. This increases your loan amount and will also increase your monthly payments. The amount of the payment increase will not be as great if the life of your loan is extended at the same time. Your loan holder is allowed to extend and/or re-amortize your loan.
- Private Sale is an option if you do not believe you will be able to reinstate your loan and cure the default. A private sale of the property will enable you to meet your obligations and receive any equity you may have built up. Most private sales are for more than the amount owing on the loan. You may sell the property to a buyer who gets his or her own financing and pays off your loan, or to a buyer who will assume your responsibility for the loan. If the buyer is assuming your loan, you should contact your lender and obtain a release of liability before the sale is closed. If your property cannot be sold for an amount which is greater than or equal to what you owe on the loan you may pay a “compromise claim” for the difference in order to help you go through with the sale. You must contact your lender to discuss the situation and get prior approval for a sale with a compromise claim payment. You will be obligated to repay this unsecured debt to the Lender, but in most cases it is dischargeable in a bankruptcy filing.
- Deed in Lieu of Foreclosure may be a better option if you will be unable to cure the default, and if a private sale does not appear realistic. Your Lender may consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and the Lender agrees to accept a deed, you will have to sign legal papers making the Lender the owner of the property. Normally, the Lender will have to pay your loan holder a claim for the difference between the value of the property and the amount you owe on the loan. If a deed is accepted, you may be released from all further liability, or you may be asked to agree to repay the Lender for all or part of the claim that they pay.
- Refunding is an option if you have a Federally Funded Loan, such as a VA loan. The governmental unit will buy a loan from the holder and take over the service. This is called “refunding”. Ask your lender to consider this alternative. If you have the ability to make mortgage payments, or will have the ability to in the future, but your loan holder has decided it cannot extend further forbearance or a repayment plan, you may qualify for refunding.
Have more questions about the foreclosure process? Ready to enlist the services of our Denver bankruptcy attorneys? Be sure to contact us today at (303) 893-0833 for a free consultation.