Sacramento Bankruptcy & Debt Relief Attorney

Foreclosure Relief

Foreclosure relief can come in many ways. Paying you mortgage delinquency is the surest strategy. But those behind on their mortgage rarely have the money to make up the arrearage on their mortgage. That’s why they are in foreclosure in the first place. But there are ways to save your home if you are in foreclosure.

Foreclosure does not mean your home has been sold. It means it will be sold if your mortgage can’t be caught up. The foreclosure process starts with the filing of a Notice of Default and Intent to Foreclose. It is a form filed with the county recorder and mailed to the homeowner. If the arrears, or delinquent mortgage payments, are not paid within 90 days, the house will be sold. Foreclosure relief is unavailable after foreclosure sale.

Before the 90-day deadline expires, there are foreclosure relief options. Paying the past-due mortgage is usually not possible. Especially within 90 days. But working with your lender can work. Requesting a modification is a good strategy. Often a modification can put your mortgage arrears at the end of the loan. Doing so can bring your mortgage payments current. It also eliminates the foreclosure sale threat. Sometimes mortgage lenders work with homeowners. Sometimes they don’t. But it is a good option to pursue. There are also government agencies that can hep. Keepyourhomecalifornia.org is a great resource.

Borrowers must be cautious, though. Especially with looming deadlines. Even if a mortgage modification can provide foreclosure relief, it must be completed before the foreclosure period expires. That’s 90 days. That’s not a lot of time to complete a mortgage modification. But it can be done. Outside companies and individuals promising to save your home can be another risk. As this news story points out, beware of scams and pitches by people trying to prey on your foreclosure peril.

Bankruptcy may be a last resort for many. But it is a good one. Often the best for foreclosure relief. Bankruptcy can provide borrowers up to 5 years to catch up on their mortgage. That’s a lot better than 3 months. And federal law prevents a foreclosure sale for those in bankruptcy. You must continue to pay your mortgage while in bankruptcy. You also must provide repayment of your mortgage arrearage through your bankruptcy. But the bankruptcy, know as a Chapter 13, will protect your home. Bankruptcy is a great debt relief tool for those in need.

Keep your home in bankruptcy

Can you keep your home in bankruptcy? It is a common question posed by potential bankruptcy clients. And the common answer to this question is yes. You can keep your home in bankruptcy.

Bankruptcy laws allow you to protect, or exempt, your property when you file for bankruptcy. You do not have to lose or surrender your possessions in seeking bankruptcy protection from your creditors. This means you can keep your home in bankruptcy and still eliminate your debt. There are limits, though.

To keep your home in bankruptcy there are limitations on the amount of equity you can protect. Depending on your individual bankruptcy situation sought, there are limits on the amount of equity you can have. Typically, you can keep more equity in your home if you are married, are older or even if your income is lower. So, too, the more you own in other forms of property can lessen the amount of equity allowed. cars, cash, and bank accounts are examples of property that may limit the amount of equity to keep your home in bankruptcy. Each individual bankruptcy case is different.

If you can protect, or exempt, all the equity in your house, you can still file bankruptcy and eliminate all your debt. This is often the case in a Chapter 7 bankruptcy. If filers can protect all the equity in their home, they can often eliminate all their debt through a Chapter 7 bankruptcy.

Even if you have more equity in your home than the law allows you to protect, you can still keep your home in bankruptcy if you repay some of your debt. This is often the case in a Chapter 13 bankruptcy. A Chapter 13 bankruptcy provides for repayment of your debt, even if only a percentage of your debt is repaid. And for each dollar you repay to your creditors, you can keep and extra dollar of equity in your home. If for example, you have $151,000 equity in your residence, but are only allowed to protect $150,000 in equity, you can still keep your home in bankruptcy if you pay $1,000 back to your creditors. It’s that simple.

Mortgage Strip-Off in Bankruptcy

A mortgage is a secured debt. If it is not repaid, the property securing the debt can be taken back by the lender. Typically a foreclosure results when the mortgage is not made. Foreclosures are addressed in other areas of this website. Suffice it to say for this topic, though, foreclosure is the process of selling your home to satisfy the debt you didn’t pay. But a mortgage can also be stripped off in a bankruptcy.

Bankruptcy can stop a foreclosure. It can prevent your home from being sold. If you want to keep your home, you will still have to pay your mortgage even if you file for bankruptcy. But bankruptcy can buy you time. It can allow you the time you need, up to five years, to get current on your mortgage. And as long as you make your bankruptcy payments, your home is protected from your bank or mortgage company.

You can also eliminate, or strip off, a mortgage through a bankruptcy. But you must establish that the loan is entirely unsecured. What this means is that the security, or collateral, for your mortgage loan is no more. Usually such a scenario results when you borrow against your home that is already mortgaged. Taking out equity in the form of a second mortgage or home equity line of credit (HELOC) are common examples. To take out such a loan there must be equity in your home. There must be at least enough equity to cover the loan. If you home was worth $175,000, and you had a $1000,000 first mortgage, you had $75,000 worth of equity to borrow against. Think of the real estate bubble or boom when “everyone” had equity and “everyone” borrowed against it. Taking out such loans was commonplace.

But, as we all know, the real estate boom went bust. Mortgages and home equity lines of credit (HELOC) lost their collateral when the homes that secured their debt lost their equitImage result for mortgage loan upside downy. To draw from the example above, the home that was worth $175,000 may now be worth only $90,000. If so, the equity evaporated to the point where there wouldn’t even be enough to cover the first mortgage. Nothing would be left be way of security for the second. Not only would the house be underwater, the first mortgage on its own would be upside down. With no equity left to cover the second mortgage or home equity line of credit (HELOC), the loan would be entirely unsecured.

If you have a loan that was once secured against your home but is now entirely unsecured, it can be stripped off in a bankruptcy. But this can be done only through a Chapter 13 bankruptcy. Attempts have been made to do it through a Chapter 7, but the US Supreme Court would not allow it. This NY Times story covered the case where an attempt was made to strip off a mortgage as part of a Chapter 7 bankruptcy.

Sacramento Bankruptcy: Foreclosure Basics

If you are facing foreclosure of your home, there are some basics you need to know.

A foreclosure does not mean your home is sold. Your house is still yours. A foreclosure is notice warning you of a mortgage delinquency. If you do not come current with your mortgage arrears (amount you are behind on your mortgage payments), the lender can sell your home to collect what they are owed. But before they can sell your home, they must give you 90 days to catch up on your mortgage.

If you cannot catch up on your payments within the 90 days, you can stop the lender from selling your home by filing bankruptcy. That does not mean, though, you don’t have to pay the delinquent portion of your mortgage if you want to stay in your home. But a bankruptcy can buy you time–up to 5 years–to catch up on your payments and, in so doing, continue to keep your home.

Modifying your mortgage may be an alternative if bankruptcy won’t work. There are a number of government agencies out there to help. KeepYourHomeCalifornia.org is a good one. Just know that if you can’t bargain your way out of a foreclosure with your lender, bankruptcy is a great option.

Bankruptcy Effect on Foreclosure or Trustee Sale

Bankruptcy stops all creditors in their tracks immediately upon the filing of a bankruptcy. This includes mortgage and trustee sale companies. If your home, or any property you own, is in foreclosure, bankruptcy can stop the sale!

“Wild card”: what it means for Sacramento bankruptcy filings

“Wild card” is a term used for bankruptcy filings here in Sacramento and California related to protecting (exempting) your property. In addition to exempting all forms of your property, exemption laws used in California allow you an extra allowance of property protection by increasing the amount of property you can protect through a “wild card.” When applicable, the wild card exemption allows over $20,000 of property protection when you file for bankruptcy. Often the wild card is used to protect cash, bank accounts or tax refunds. It is a great tool to protect your property while eliminating your debt through bankruptcy.

Transferring property prior to filing bankruptcy

Before filing bankruptcy do not transfer your property to anyone. Doing so may subject the property to a claim of the trustee. This means that even if you give your property away, the trustee can potentially take the property back and use it to pay your creditors.

Exemptions laws, particularly in California, generally allow you to protect all your property and, in so doing, there is no need to shield your property by giving it to someone else before you file for bankruptcy.

Second Mortgage/Home Equity Line of Credit?

Did you know that bankruptcy may allow you to eliminate your second mortgage (also known as a home equity line of credit)? If your home is worth less than what you owe on your first mortgage, a Chapter 13 bankruptcy filing can “strip” the second mortgage, meaning the loan will be discharged and the debt eliminated!