When people go through financial hardships, one of the first payments they fall behind on is their mortgage payment. Some lenders and mortgage companies may be willing to create some sort of plan with the homeowner. But most other lenders do not engage in any negotiations. In situations where the lender is not willing to work out a deal, such as a short sale or a loan modification, the foreclosure process is the likely option for the lender to seek. The foreclosure process involves the lender repossessing and typically auctioning the house. The proceeds from the public auction go towards repaying the mortgage and any legal costs.
Despite what most of us think, the foreclosure process takes some time. Most lenders do not generally start the foreclosure process until the homeowner is about two or three months behind on their mortgage payments. This delay allows the homeowner time to consider alternatives to foreclosure, such as a short sale or deed in lieu of foreclosure. If these alternatives do not work, bankruptcy may help.
Delaying Foreclosure with an Automatic Stay
If you have no other options when facing a foreclosure, bankruptcy can become a tool to help you keep your house. When you file either Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an Order for Relief. This order grants you an “automatic stay” that directs your creditors to immediately stop their collection attempts. This means that if you are in danger of losing your house to a foreclosure sale, the sale will be postponed by law until your bankruptcy is finalized. An automatic stay can buy you approximately three to four months time.
Exceptions to an Automatic Stay Option
There are two exceptions to the “buying time” power of an automatic stay:
Lender files a motion to life the stay. This motion seeks permission from the bankruptcy court to continue with the foreclosure sale. If the bankruptcy court grants the motion, you will not receive the extra three to four months of time.
Foreclosure notice already filed. California, like most other states, has enacted laws that require a lender to give the homeowner at least three months notice before scheduling a foreclosure sale. If the homeowner waits two months after receiving the three month notice to file for bankruptcy, the three month period would have passed after being in bankruptcy for only one month. In such a case, the lender could successfully file a motion to life the stay and proceed with the foreclosure sale.
Call an Experienced Stockton Bankruptcy Attorney
Have you already filed for bankruptcy or are planning to file for bankruptcy? If so, it may be in your best interest to immediately consult with an experienced bankruptcy attorney to help you determine what is in your best interest.
For more information or to schedule a complimentary consultation with Stockton bankruptcy attorney Gurjit Srai, please call (209) 323-5558 or (559) 449-1447, or complete our online form.