Often I will meet homeowners who have fallen behind on their mortgage payments and are facing a potential foreclosure, or who may even be in the middle of a foreclosure. Often, it is my job to perform triage with the situation; and depending on the situation, there are several options available to the homeowner. This post will address some of these options, and focus on practical solutions.
Foreclosures in Oregon often are conducted judicially. This simply means that the foreclosure is an action completed through the court. If a foreclosure lawsuit is initiated, the homeowner will receive a summons and complaint, and be provided 30 days to answer. Often, it is when the homeowner receives a copy of the complaint and a summons that he or she will contact my office for a free appointment to discuss options. These options range from foreclosure defense to bankruptcy to, even in some cases, walking away from the property or placing the property up for sale. This post will focus on saving the property either through foreclosure defense or filing a Chapter 13 bankruptcy case.
1. Foreclosure Defense: Foreclosure defense is just that; defending against a foreclosure action. If the homeowner is facing a foreclosure yet is not ready to consider bankruptcy (discussed below), foreclosure defense is a valid option. Often, this takes the form of filing an answer in the foreclosure lawsuit, which provides additional time for the homeowner to reinstate the mortgage loan (and therefore brings the loan out of foreclosure, usually with a payoff of the arrears), or sell the house to recoup any equity in the house, or short-sell the house, or to seek a modification. Usually, the latter option is chosen: the homeowner needs additional time to obtain a mortgage modification through HAMP or other modification programs. At this point, I will have my clients go to NEDCO (Neighborhood Economic Development Corporation) or other housing counseling agency while I deal directly with the court and opposing counsel; NEDCO and other such agencies are a free resource to homeowners seeking help to avoid a foreclosure. Sometimes, with the aid of NEDCO or other housing agencies, clients may be able to obtain a modification of the mortgage, and, as a result, the foreclosure case will be dismissed (and the house is saved from foreclosure). But what if the client is unable to obtain a modification, yet wants to still keep the house? We consider bankruptcy.
2. Bankruptcy as a Practical Tool to Stop a Foreclosure & Save the Home: If foreclosure defense and mortgage modification do not pan out, we can file a Chapter 13 bankruptcy case (or we may just start by filing a Chapter 13 case and avoid foreclosure defense altogether). A Chapter 13 bankruptcy will allow a homeowner to place the arrears (or amount of mortgage payments that are behind) in a plan to be paid down over 5 years at zero-percent interest rate. At the same time the arrears are being paid, the homeowner must also pay current mortgage payments. For example, a Chapter 13 bankruptcy to stop a foreclosure and pay down arrears may be used by a homeowner who lost a job, could not make payments on the house, but has since become gainfully employed and can now make payments on the mortgage and catch up on the arrears over time. A Chapter 13 bankruptcy, therefore, is a very useful tool for saving a house from foreclosure.
At my meetings with clients, I discuss options available to saving a home from foreclosure. This includes a discussion of Chapter 13 bankruptcy as well as foreclosure defense and mortgage modification.
If you are behind on your mortgage and are facing foreclosure, or if you have been served with foreclosure papers, please call for your free bankruptcy and foreclosure defense consultation here in Eugene.