Can Filing Bankruptcy Stop a Foreclosure Sale and Save My Home?

Can filing bankruptcy stop a foreclosure sale and save my home?

Yes, it can stop the foreclosure process and allow you time to catch up on the past due amounts, as well as deal with your other debts.  There are many reasons why our clients face foreclosure, such as job loss, sudden illness, divorce and excessive debt obligations.  If you, like many other Americans have suffered some tough times recently and you have fallen behind on your mortgage payments and now the lender is making noises about instituting foreclosure proceedings against you.

Foreclosures in California generally do not involve the court system.  The deed to your home is held by a Trustee, hence the term "Trustee Sale".   The process generally works like this, however keep in mind that the specific terms of your loan may change when the Notice of Default is filed:

Step One: After missing three consecutive payments, the bank files a "Notice of Default" (also called an "NOD").  The NOD is filed with the County Recorder and a certified copy is sent to you. 

Step Two: Notice of Trustee Sale.  The Notice of Trustee sale may be recorded three months after the NOD is filed.  This notice will set a date of the Trustee auction.

Step Three: Trustee Auction, this date can be twenty days after the Notice of Trustee Sale was recorded.  This is the final step in the foreclosure process.  If the property was not sold at auction it will revert back to the bank.  

The first thing a bankruptcy filing accomplishes is to stop the foreclosure process.  Lenders cannot foreclose or even try to collect debt until permitted to do so by the court.

But first, you have to decide what type of bankruptcy to file for.  There are, basically, two types to choose from: Chapter 7 and Chapter 13.

A Chthe bank can seek permission from the court to continue the foreclosure process, or the bank just waits until your bankruptcy is concluded.

Chapter 13 is usually more effective at helping people keep their homes.  It gives them time to repair their finances, usually three to five years, during which the court agrees to an income-based budget with monthly payments made to the bankruptcy trustee.

What does a Chapter 13 bankruptcy trustee do?

The trustees pay the bills, first paying off the arrears on the mortgage.  After that, the trustee pays off unsecured debt, starting with back income taxes.   Next in line comes unsecured debt like credit cards and medical bills.  By then, there's usually little cash left and these bills are paid at less than the full rate, often as little as five cents on the dollar.

If your head is beginning to spin, do not be alarmed.  An attorney at the Leventhal Law Group is available for a free consultation to help determine if bankruptcy is the correct thing to do.  And if so, what chapter you should file.  Call 818-347-5800 or send an email to schedule a free initial consultation.

Borrowers, if they kept up on their payments, can emerge from bankruptcy with their homes still in their possession.

In addition to stopping foreclosure sale on your home, Chapter 13 also allows you to remove certain judgment liens against your home in some instances, as well as under secured mortgages or deeds of trust. (Chapter 7 can remove judgement liens too).

Bankruptcy is not; however, going to help every troubled homeowner. If, for example, the homeowner's biggest problem is not enough money, bankruptcy is not going to solve that.

Bankruptcy  is one of the best tool there for people behind in payments but who have ongoing income.

THE BIGGEST MISTAKE that people make is waiting until a few days prior to the foreclosure sale date to look into bankruptcy as an option.

You can look back years from now and say, “That’s the day I got my life back.”  We are here to help you do just that!

Call 818-347-5800 or send an email to schedule a free initial consultation and to speak directly with attorney Jonathan Leventhal, a Woodland Hills, California, Bankruptcy Attorney.

The Leventhal Law Group, P.C. serves all of the Los Angeles, Ventura and .the San Fernando Valley.