Act Now if You Might Be Facing Foreclosure and Bankruptcy in the Future

The possibility of losing a home is traumatic, especially in the midst of all the turmoil of a pandemic. Often people facing foreclosure don’t seek help or they delay getting help, limiting their options for resolving the situation. This is especially true right now as the Federal Housing Finance Agency (FHFA) has extended its ban on foreclosures and evictions until at least August 31.1 The FHFA oversees the provision of more than $6.4 trillion in aggregate funding for U.S. mortgage markets and financial institutions including Fannie Mae and Freddie Mac loans.

When the federally-backed mortgage foreclosure ban is eventually lifted, there will likely be a surge in foreclosure activity, so now is the best time to get expert advice on your individual options if you are facing foreclosure in the future.

A bankruptcy lawyer can provide you with options based on your situation.

The lawyer can help you navigate the foreclosure process and may even be able to devise a plan that may make foreclosure unnecessary. A consultation with a lawyer not only helps you understand what to do and how foreclosure works, but the lawyer can also explain your legal rights and responsibilities.

Lending institutions typically begin foreclosure proceedings after a homeowner has missed three to four payments.2 Then they must follow state foreclosure laws before selling a home at auction. This process can take from six months to more than a year depending on state laws and other factors, including whether the borrower and lender are in negotiations to stop the foreclosure.3 Those negotiations can result in forbearance, a temporary postponement of mortgage payments.

Other options that a homeowner has include a short sale and a deed in lieu of foreclosure. A short sale occurs when the lender agrees to a sale of a home and will accept less than the amount owed on the debt. A deed in lieu of foreclosure is an option in which the homeowner conveys all interest in a property to the lender through a special deed instrument. A deed in lieu of foreclosure results in less harm to the borrower’s credit than an actual foreclosure action.

A bankruptcy lawyer can also advise you on whether you should file for bankruptcy before or after your foreclosure. Filing for Chapter 7 bankruptcy has different implications for a homeowner than filing for Chapter 13 bankruptcy protection and it is important to understand each type of bankruptcy and how they affect foreclosures.

Once you file for either bankruptcy protection an order for relief is issued by the court which gives you an “automatic stay” directing your creditors to cease their collection activities immediately.4 This will legally postpone a foreclosure sale for about three to four months if you file for Chapter 7 protection. Chapter 13 protection can help you keep your home, as it lets you repay late unpaid payments over the length of a Chapter 13 repayment plan, which is about five years long in most cases. Second and third mortgages may not have to be paid back at all under Chapter 13 bankruptcy protection depending on whether they are deemed as unsecured debt.

The foreclosure and bankruptcy processes are difficult to navigate and a mistake, such as moving out of your home when you can stay there for free during the foreclosure, can cost you money, the ability to qualify for assistance, and undue harm to your future borrowing ability. Help is available, but it does take action on the homeowner’s part. The sooner you contact a bankruptcy professional for help, the more options you will have.

Hines Law is a full-service bankruptcy firm that has been helping residents throughout Massachusetts with debt relief for 20 years. If you are facing foreclosure, bankruptcy may be the best way to save your home. We specialize in Chapter 7 and Chapter 13 bankruptcy and help you restructure your financial future.

Our experienced bankruptcy attorneys can help you navigate through this overwhelming and difficult time. Call Hines Law today for a Free Case Evaluation!