5 Foreclosure Myths Debunked
Although foreclosure rates are no longer at historical peaks as they have
been in recent years, millions of homeowners across the nation still face
the personal and financial challenges of foreclosure proceedings. This
is true in Texas, where foreclosure activity across the state and the
Dallas-Fort Worth area has increased in past two years. That leaves many homeowners struggling to find relief during tough financial times. Call to speak to a foreclosure Attorney.
At Allmand Law Firm, PLLC, our Dallas bankruptcy lawyers assist clients explore all of their available options for debt relief and
foreclosure defense, including bankruptcy. As we mentioned in a previous blog that
debunked common bankruptcy myths, misconceptions and inaccurate information can severely compromise individuals and property owners who want to secure the financial fresh start they need. That’s why our legal team wanted to put together the following list of foreclosure myths and why they are simply untrue:
- Filing for bankruptcy stops a foreclosure. While bankruptcy may temporarily delay the foreclosure process – and provide the necessary time and funds to enact a defense strategy – it is not itself
a strategy for completely stopping it. Other loss mitigation options may be available if you contact your mortgage servicer in a timely manner, including loan modifications. Depending on your circumstances, the automatic stay afforded by bankruptcy may also provide you with the time and funds to catch up on missed payments, or enact a repayment plan that fits the mortgage servicer’s needs.
- You’re not responsible for paying the bank’s legal fees. This, unfortunately, is not the case. If you read the fine print of your mortgage agreement, you will find that you are in fact responsible for the bank’s legal fees in the event of a foreclosure.
- The bank really wants your home back. Foreclosure can be a time consuming process for banks, and is often used as a last resort. Most banks will do everything possible to work things out with a homeowner in order to avoid foreclosure, putting you in position to stay in your home when possible.
- Your involvement with the property is over once the bank takes it back. If the bank sells your home after foreclosure for less than what you owed on your mortgage, you will be held responsible for paying the difference, or “deficiency.” Furthermore, the bank can collect interest on that amount. A chapter 7 bankruptcy or deed in lieu of foreclosure may clear you of owing a deficiency, so contact Allmand Law Firm, PLLC
to speak with a bankruptcy attorney to talk about your options.
- Even if I pull together the money to stop a foreclosure, there is no way
to stop it. Most states, including Texas, have laws that require foreclosure proceedings to be stopped if the homeowner has the money to cover all missed mortgage payments, late fees, and legal fees owed. The lender or servicer is required by law to send the borrower a notice of default and intent to accelerate, which gives the homeowner at least 20 days to cure the default before notice of sale can be given.
If you are behind on your mortgage payments or are currently facing foreclosure, you have options. We invite you to contact Allmand Law Firm, PLLC to discuss your unique case and obtain advice tailored to your situation. When you
choose to work with our firm, we may be able to put a stop to foreclosure proceedings, protect your credit history, protect you against potential tax obligations, and more.
Case evaluations are provided free of charge.
Most Common Questions about Bankruptcy and Foreclosure
Questions about Bankruptcy and Foreclosure
If you’ve fallen behind on mortgage payments and are facing foreclosure , bankruptcy may help you keep your home. The process can help stop debt collectors, slow down foreclosure proceedings and give borrowers more time to work out details related to their finances. In most cases, bankruptcy can help you make missed payments while giving you additional time to reorganize your finances.
Consumers considering bankruptcy as an option to help them keep their home during foreclosure may ask the following questions:
When I file bankruptcy what happens to my mortgage?
This will depend on the bankruptcy chapter filed. Both chapters have exemptions that allow you to keep certain assets and property. In Chapter 7 bankruptcy , if you are current on your mortgage you should be able to reaffirm the debt. In a Chapter 13 bankruptcy missed mortgage payments can be rolled into a new repayment plan.
What is the purpose of the automatic stay?
This action goes into effect when bankruptcy is filed; it halts collection activity from creditors. In a Chapter 7 bankruptcy, the stay can stop your home from being sold via sheriff sale and possibly extend your redemption period if you are already in this stage. In a Chapter 13, the stay halts collections on your mortgage until the court verifies your new payment structure.
What if I default on my payments in Chapter 13?
Payments are usually made either during or after the automatic stay period. If you default during the period, foreclosure is usually prohibited. If you default after the period, the bank may get an order from the court to continue with the foreclose, especially if a lien is on the property.
If I file Chapter 13 can it be converted to Chapter 7?
Depending on personal circumstances, your case could be converted but in some cases you may need permission from the court. Questions and concerns should be reviewed with a bankruptcy attorney.
What Happens When Chapter 7 Bankruptcy Is Filed during a Pending Foreclosure?
Many who qualify to file Chapter 7 bankruptcy may do so due to
foreclosure proceedings against their home. The filing process helps stop proceedings from moving forward and it may give you more time to plan your next move and explore options. Some may wonder if the filing process will have an effect on the sale of a home, especially if a date has yet to be determined. This is often a concern for those who file just days prior to the sale occurring.
While the process may vary depending on the state you live in, for most
people they experience similar actions depending on how far their foreclosure has progressed before they filed for protection. Many filers have between 6 weeks and 3 months of extra time to stay in their home when the automatic stay goes into effect when the bankruptcy petition is filed. With the
stay in affect the lender will stop or postpone foreclosure proceedings until they learn from the court the stay has been removed.
What happens next may depend on whether you want to keep your home. Filing may give you additional time to reach an agreement with the lender. The lender, on the other hand, may be able to help you relocate if you decide
not to stay in the home. Some offer relocation assistance depending on qualifications. While filing bankruptcy can help in discharging unsecured debt, few file since it may give the extra time needed to make a rational decision about their home without the added pressure from the lender.
Call to speak to a foreclosure defense lawyer
Do Lenders View Chapter 13 Bankruptcy More Favorably Than Foreclosure?
Do lenders view Chapter13 bankruptcy more favorably than foreclosure? For the answer, let’s take a look at the underwriting standards of a Fannie Mae or Freddie Mac backed loan. If you file for bankruptcy, you only need to wait four years after bankruptcy to qualify for a Fannie Mae or Freddie Mac mortgage. But if you lost your home to foreclosure, you may need to wait up to 7 years after the foreclosure to qualify for these government backed mortgages.
One of the reasons that many mortgage lenders favor debtors who filed for Chapter 13 bankruptcy over those who allowed their property to go into foreclosure is because repaying a mortgage in bankruptcy shows that you have every intention of repaying your debt. Chapter 13 bankruptcy filing also shows that you were willing to face the reality of your financial situation and made secured debt such as your mortgage a priority. In Chapter 13 bankruptcy unsecured debt can often be partially or fully discharged allowing a debtor to avoid foreclosure and commit more of their financial resources to repaying a mortgage.
While it may not be possible for every debtor to remain in their home with bankruptcy, filing bankruptcy can offer other options. For example, a debtor who files for bankruptcy may be able to convince the lender to allow them to sell the property in a short sale or return the property in what’s called a deed-in-lieu of foreclosure. Whichever process the debtor chooses it will be more manageable for both themselves and their creditors in bankruptcy.
Consult a Foreclosure attorney today
Key Points You Should Know about Bankruptcy and Foreclosure
Most people are aware that bankruptcy can help you keep your home, but
what some may not know is that the process can help you do this in more
ways than one. In most cases, it depends on your unique situation and
which chapter is filed. Aside from preventing or
avoiding foreclosure, you may be able to reduce your mortgage payment and cure default payments
to bring your mortgage current.
Points to review when it comes to facing bankruptcy:
- The automatic stay can delay or stop foreclosure in either Chapter 7 or Chapter 13 bankruptcy. The automatic stay can give debtors more time to figure out a solution depending on which chapter is filed. Yet, the effect of the stay may vary depending on where you are in your situation.
- Chapter 13 can restructure debt obligations to make it easier for you to repay them. Some consider this option when they were unable to reach a negotiation with their creditor. Chapter 13 helps homeowners pay arrearages
overtime on their mortgage so they can keep their home. You need to be able to make current mortgage payments as well with this plan. This plan can help you eliminate second and third mortgages by discharging them as an unsecured debt.
- Chapter 7 filers may get more time to stay in their home if foreclosure is imminent. Some debtors use this time to save money to place toward their missed mortgage payments or toward moving to a new place. Certain
debts attached to the home may be canceled (such as a home equity loan or additional mortgages). Some debtors may qualify to have certain property tax liabilities be eliminated.
Foreclosure Options for Military Members
Fannie Mae has created the KnowYourOptions.com website to help its homeowners discover their options when they’re faced with foreclosure. There is a special segment dedicated to military members who are having issues with their mortgage payments to Fannie Mae.
This mortgage company offers a special military hardship for some homeowners and others may get protection from a foreclosure for up to nine months following the termination of their active duty status. To determine if you qualify for a military hardship you need to prove and have received Permanent Change of Station orders, you’re in active duty service or recently left and you or your spouse was injured in active duty.
There are a variety of mortgage programs designed to help American military members navigate their home loans. The programs range from ones that are designed to help you keep your home and avoid foreclosure to ones that are designed to simply move you out of your home without too much stress and financial difficulty.
For military members who want to say in their homes the programs to consider are refinancing, a repayment plan, a military forbearance, a home loan modification and a deed for lease. For people who would like to leave their home and get out from under the burden of their mortgage a short sale or a deed in lieu are both options to consider.
If you’re a military member and concerned about your mortgage the military websites Army OneSource and Military OneSource can offer you information and assistance with similar plans that will protect you from foreclosure, whether your want to stay in your home or leave it.
Have Any Foreclosure Questions or Need Assistance?
Have any questions related to foreclosures or need assistance? We can help ensure that any and all potentially dischargeable debts are eliminated. To set up a free consultation, give us a call or fill out our contact form .
Voluntary Foreclosure Property Must Comply With City Code
Chapter 7 bankruptcy debtors who surrender their property during bankruptcy may still be bound by the code and regulations enforced by their city or municipality until the secured creditor takes action to regain title of the property. Until the creditor legally holds the title to the property the homeowner may still liable for complying with code and could be subject to fines if found to be in violation.
Things to do while you wait for the creditor to take legal hold of the property:
- Find out about the code in your city. What are the minimum standards for complying with the code and regulations of you city.
- Make sure the property is up to code. If there our code violations you need to find cheap or free ways to correct those code violations.
- Keep the yard in order. Cut the grass and board up any broken windows.
- Keep the building itself well maintained, at least to the minimum standards.
It’s also important that debtor realize that they are not required to surrender their property in bankruptcy.
Other options for handling property in bankruptcy:
- A debtor in bankruptcy can choose to pay a creditor the full value of the property. This may be smart if the property has very little monetary value, has some real value to the debtor (it’s their primary home or the home of a family member) and the debtor has the cash available.
- A debtor can reaffirm the debt on the property during bankruptcy. Basically during a reaffirmation, the debtor agrees to continue paying their mortgage as agreed.
However, if a debtor chooses to surrender their property during bankruptcy, failure to comply with city codes and regulations could result in steep fines and even jail time. Remember, any fines accrued after filing Chapter 7 bankruptcy will not be discharged in your bankruptcy case.
Questions You Should Answer Before You Apply For Foreclosure Loan Program
The Obama administration has returned to the “drawing board,” in a second go of trying to curb the foreclosure crisis. After admitting that HAMP, in its present form, has failed to save enough homeowners from foreclosure, the administration is rolling out a program that is designed to help unemployed homeowners avoid foreclosure.
“The biggest driver of foreclosures today remains unemployment,” said Housing and Urban Development Secretary Shaun Donovan, who added that he expects the initiative to reach “tens of thousands of families” and to set a standard that the financial industry will follow. The expanded timeframe is necessary, Donovan said, and simply reflects “how long it takes unemployed borrowers to find a job.”
The program will provide an interest-free loan to unemployed homeowners until they can find work. But should unemployed homeowners really embrace this program? And if so, under what circumstances?
Questions homeowners should ask before their next foreclosure prevention scheme:
- Is my home worth saving? If a homeowner is severely underwater on their mortgage and the home values in their city are on a long-term downward trend, should they really take out a loan while they are unemployed so they can pay an inflated mortgage? This is a decision every homeowner facing foreclosure and declining home values must make.
- Are my other debts out of control? If a homeowner is facing foreclosure and is unemployed with no other debts than their mortgage, the foreclosure prevention loan program may be a good deal. However, if the same unemployed homeowner facing foreclosure is also facing credit-card defaults and delinquent student loan payments, taking out more debt may not be a smart move.
- How long will I be unemployed? The average American is now remaining unemployed for at least a year. And many unemployed homeowners are finding that they will need to retrain because their skills are obsolete. Does that sound like you? If so, you need to consider if you will really be able to repay that foreclosure prevention loan after two years.
(source: WashingtonPost.com )