Are you behind on your mortgage? You are not alone. (And even if you are current on your mortgage, did you know we might be able to eliminate your second mortgage or equity line in a chapter 13 bankruptcy?)
Increasing numbers of homeowners are falling behind on their mortgages for several reasons including:
- Loss of income due to loss of job, medical problems, or divorce.
- Higher mortgage payments due to rising interest rates. Homeowners with variable mortgages, equity lines, and negative amortization mortgages are seeing their payments increase.
- Rising property taxes and great increases in property insurance.
If you are falling behind on your payments, try and communicate with your lender before it proceeds to file a foreclosure. You may be able to enter a work-out and avoid owing the bank attorney’s fees and costs that it will charge you once the lender sends your case to an attorney to file the foreclosure.
It is very important to understand that Florida has a judicial foreclosure system. This means that the lender must complete a court process to finish its foreclosure. This process takes months to complete. What must the lender do to complete the foreclosure process?
- First, a process server will come to your door to deliver a summons and complaint of foreclosure.
- Do not panic, because there is still plenty of time and several options to save your home.
- A response must be filed with the court within 20 days of service of the complaint to raise any defenses.
- You should contact your attorney immediately after being served.
- Even if no response is filed within 20 days, this does not mean that the home will be foreclosed on the 21st day.
- The lender must file a motion with the court with advanced notice to the homeowner for a court date to obtain a judgment of foreclosure.
- The judgment of foreclosure will provide for a foreclosure sale date in approximately 30 days, though often much longer if a request is made to the judge for a longer sale date.
- There must be an official publication with a notice of the date that the property will be sold at auction.
- The homeowner does not lose the property until the foreclosure sale takes place. (A homeowner may file an objection to the foreclosure sale within 10 days after the sale if there are legitimate grounds for this objection)
We can provide you assistance during this time. We can represent you during the court foreclosure by reviewing the complaint, filing a motion to extend time with the court to undertake a review of your defenses, making sure that the lender properly takes the necessary steps to foreclose, and asking the court to schedule the foreclosure sale longer than the usual 30 days after the judgment. There are also recent aggressive defense approaches that may be available, and we can discuss whether you want to use these more aggressive tactics to defend the foreclosure.
During this time, we can consult with you and provide representation to save your home from foreclosure. Options include:
- Coordinate payment to fully reinstate the mortgage. This requires payment of all amounts to bring the mortgage current, including the bank’s attorney’s fees and costs.
- Negotiate a work-out arrangement or loan modification with your lender which would not require a full reinstatement.
- Review possible refinancing.
- Discuss the advisability of selling your home so that the equity will not be lost in foreclosure. Due to the declining real estate market, sale or refinancing are typically not available options.
- Discuss the advisability of a short sale.
- File a chapter 13 bankruptcy.
Sometimes filing a chapter 13 bankruptcy is the only way to save your home. A chapter 13 payment plan bankruptcy must be filed prior to the foreclosure sale. Though homeowners should not wait to the last minute to consult with an attorney about filing chapter 13, we may be able to file on short notice. (The new bankruptcy law requires that the debtor must receive a certificate of completion of a credit counseling course from an approved agency prior to filing the bankruptcy.)
Chapter 13 provides an oppurtunity to the borrower to reinstate the mortgage during a period of time up to 5 years by paying the regular monthly payment plus an additional amount to catch up. By filing Chapter 13, the borrower also has additional time to try to sell or refinance.
Additionally, depending on your case, in a chapter 13 we might be able to eliminate an equity line or second mortgage as a lien against your home. This “lien stripping” is possible if your home is valued at less than the balance owed on the first mortgage. For a detailed explanation, see the seminar written for attorneys. Chapter 13 might save your home and eliminate your second mortgage.
And did you know that even if you are not behind on your mortgage, you might be able to file a chapter 13 and eliminate the second mortgage or equity line?