Stopping a Home Foreclosure with Bankruptcy

Bankruptcy and Foreclosure Proceedings

Stopping a Home Foreclosure with BankruptcyIf you are struggling to meet your financial obligations, and have fallen behind on your mortgage payments, you may be worried about a foreclosure proceeding and the loss of your home. You may be considering filing for bankruptcy to prevent or stop foreclosure proceedings. Here’s what you need to know.

The most important thing to understand is that bankruptcy won’t terminate a foreclosure proceeding—it will only suspend a foreclosure action. Once your bankruptcy is complete, your lender can move the process forward again.

That doesn’t mean, however, that a bankruptcy filing won’t help you keep your home. Upon the filing of a bankruptcy petition, an automatic stay will go into effect, preventing your creditors from calling, writing or taking any other legal action to collect debts from you. The automatic stay can get you some relief from the constant outflow of cash. In addition, by discharging other debts, you may be able to free up the funds to make your monthly mortgage payment affordable.

It is also important to understand that you cannot seek to discharge the debt on your home in a Chapter 7 proceeding and still keep the house. Both state and federal bankruptcy laws grant you a certain dollar amount exemption in your home in a Chapter 7 filing, but it’s an exemption in the equity in your home. Unfortunately, you can only recognize the equity in your home when you sell it.

The best way to save your house through bankruptcy is to file Chapter 13 reorganization and work out a new payment plan with your mortgage lender. You will still get the benefit of the automatic stay, and will have that benefit for a three-to-five-year period. In many instances, when you reorganize, you can get your lender to waive late fees and penalties, and fold any arrearages into the principal balance of your note.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

‘No One Gets A Free House’

No One Gets A Free HouseCourts in New Jersey, Pennsylvania and elsewhere have repeated this phrase quite a bit since the mortgage crisis began in 2009. Distressed homeowners burdened by mortgages that had become unaffordable complained of unfair lending practices, both inside and outside of bankruptcy court. While not unsympathetic to their plight, most judges were very reluctant to grant legal relief, absent extraordinary circumstances. However, all the stars aligned for two Madison homeowners in Washington v. Specialized Loan Services and The Bank of New York – Mellon (In Re Washington). What happened in this case, and what does it mean for your family?

Facts

In 2007, the Washingtons purchased a three-family home on Walnut Street. They failed to make the installment payment due on July 1, 2007, and their 30-year adjustable rate mortgage loan has been in default ever since then. The bank accelerated the note in May and filed a foreclosure complaint in December 2007. These dates become very important later.

Decision

A provision in the Fair Foreclosure Act of 2009 places a six-year statute of limitations on a mortgage foreclosure proceeding. In other words, the bank has six years from the date of filing to either take the property or formally reinstate the loan.

Probably because the case slipped through the cracks, the court dismissed the foreclosure action because the bank did not pursue the action, and its six years expired in December 2013. The bank tried to argue that a thirty year statute of limitations applied, but the court was unconvinced.

After “gargl[ing] to remove the lingering bad taste,” Bankruptcy Judge Michael Kaplan ruled that the statute of limitations had expired and that the mortgage was void. The Washingtons are also immune from a deficiency judgment or any other action on the note. Hello, free house.

Application

The ruling only applies when the statute of limitations has expired prior to the commencement of a foreclosure case. Such instances are quite rare, but not unheard of. The same thing happened in Texas in 2001!

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Will the Short Sale of Your Home Damage Your Credit Rating?

If you are behind on your mortgage and facing potential foreclosure proceedings, is it better to dispose of your property through a short sale (where you sell your home for the market value, even though it’s less than the amount remaining on the mortgage) or to go through the foreclosure process? Is there any advantage to using a short sale to address your financial challenges?

Short Sale vs. Foreclosure—Any Benefit?

According to most industry experts, the impact of a short sale on your credit will be almost identical to that of a foreclosure, assuming that you have chosen to short sell your home because you are behind on your mortgage. Most credit reporting agencies reduce your score by a specific number of points for certain events, including:

  • A payment more than 30 days late
  • A payment more than 90 days late
  • A foreclosure, short sale or deed-in-lieu of foreclosure
  • A bankruptcy filing

Industry representatives also say that it takes about the same amount of time—around 7 years—for a person to restore his or her credit rating after a foreclosure or short sale. Ironically, the higher your credit score before the short sale or foreclosure, the longer it will typically take to reestablish that high credit rating.

According to a study by the Fair Isaac Corporation (FICO), the industry leader in software to calculate credit scores, people who short sell a home have a higher tendency to default on other credit obligations. One report showed that approximately half of all people who sell short default on another obligation within two years. Because of this data, credit reporting agencies tend to treat short sales like foreclosures.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

New Streamlined Loan Modification Promises To Take Paperwork Out Of Mortgage Modification

The Federal Housing Finance Agency (the agency created to oversee Fannie Mae and Freddie Mac) have just implemented a new process for obtaining a mortgage payment. The process, called “Streamlined Modification Initiative” stands to take the headache of extensive document requests and lost paperwork out of the mortgage modification process. However it is important to know that the process isn’t available for everyone. In order to qualify for the Streamlined Modification, a borrower must meet the following criteria:

    • The loan must be 3 months to 24 months delinquent.
    • The loan must be the first mortgage on the property
    • The loan cannot have been modified two or more times already
    • The loan-to-value ratio cannot be greater than 80%. (This means that if a home is worth $100,000, the loan balance cannot be greater than $80,000).
    • The loan must be owned by Fannie Mae or Freddie Mac

Under the Streamlined Modification Initiative, servicers are to identify homeowners who qualify and send them an offer. The offer will include trial payments and the borrower accepts the offer by making the trial payments.

While the program stands to help many people save their homes, it does not affect people without a significant amount of equity in their homes. If a home is underwater, or worth less than the mortgage on the home, then the loan is not eligible for this program.

John W. Hargrave & Associates has helped people just like you with mortgage modifications, stopping foreclosure, and saving their homes. Sometimes a Chapter 13 bankruptcy can be used to save a home. Other times a good mortgage modification can be used. In today’s ever-changing climate, you deserve skilled lawyers who know how to save homes. John W. Hargrave & Associates offers a FREE consultation, so call us today at 856-547-6500 !

Housing Recovery on the Way? If you are in debt and own a home, consider a bankruptcy to set yourself up for success

This morning the Associated Press reported two things which indicate that the housing market is strengthening.

First, foreclosure repossessions fell in February 2013 to the lowest level since September 2007. This decline is accompanied by increasing house prices and state programs to help people save their homes. The number of completed foreclosures for February 2013 was 45,038, which is 11% less than January 2013 and a whopping 29% down from February 2012. In addition, 25% fewer foreclosures were started in February 2013 than in February 2012. Second, home mortgage interest rates have ticked up for the first time in a long while, with the average 30 year rate for the US increasing from 3.52% to 3.63%.

Taken together, these two things indicate that the housing market is heading for a rebound. A rebounding housing market means that home values could increase rapidly.

If you own a home and the mortgages exceed the value of your home, then filing a bankruptcy will typically allow you to shed your unsecured debts while keeping your home. In other words, if there is no equity in the home, it will not be sold in a bankruptcy proceeding. However, if you own a home with a lot of equity, it could be sold by a Trustee in a Chapter 7 bankruptcy or you would be required to pay extra money in a Chapter 13 bankruptcy to ‘buy back’ that equity from creditors. Rising home prices mean that many people who currently have no equity and lots of debts might find themselves in a position where they suddenly have equity, which makes it more difficult to shed your debts in a bankruptcy filing.

If you own a home with little or no equity, now may be the perfect time to file a bankruptcy. A properly timed bankruptcy will allow you to wipe out your debts so that you can enjoy and take advantage of the rising values for your home.

New Jersey Foreclosures Progressing Faster Than Ever

New Jersey’s homeowners are among the hardest hit from the current economic recession. New Jersey, Nevada, and Florida have the highest rates in the country of people who are behind on their mortgages. And things are about to get even tougher for New Jersey homeowners faced with a foreclosure lawsuit. The New Jersey foreclosure process has been made faster, with people’s homes being sold in as little as nine months.

Historically it has taken between fifteen and eighteen months for the mortgage company to file a foreclosure and then foreclose on a homeowner’s home. However things have changed drastically in the last four years. Foreclosures filed prior to 2011 are still plagued by the issues of “robo-signing” and do not appear to be moving through the foreclosure system at all – the mortgage companies are still trying to figure out how to clean up the “robo-signing” mess that they created. Many of our clients, who were served with foreclosure papers prior to 2011 are still in their homes because the mortgage company has not completed the foreclosure.

However, the story is very different and much harder for foreclosures filed in 2012 and 2013. Recently the New Jersey Courts implemented electronic filing for foreclosure cases. This technological advancement, along with a reduced volume of filed foreclosure cases, has sped up the foreclosure process. Homeowners can now only expect to stay in their homes for between nine and fifteen months after a foreclosure complaint has been filed.

If you have been served with a foreclosure complaint, you should take immediate action – do not delay! At John W. Hargrave & Associates we have helped countless people save their homes and solve their debt problems. We offer a free consultation, so you have nothing to lose – and everything to gain! Call us today at 856-547-6500!