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Atlas Law Firm Jan. 12, 2023

Is It Too Late to Stop a Foreclosure by The Time Someone Receives a Foreclosure Notice?

It’s not too late to remedy a foreclosure if you’ve received a foreclosure notice, but you must act before the foreclosure sale date. There are two ways to foreclose a home in Minnesota. A mortgage lender can foreclose either by foreclosure by advertisement or foreclosure by action. Foreclosure by advertisement is simply following a notice procedure after the person has defaulted on his/ her mortgage. Foreclosure by action means that the lender brings a lawsuit in court to sue the homeowner in order to get the foreclosure relief. In Minnesota, for a home, a mortgage lender has the option of choosing either of those two methods of foreclosure and by far, ninety-nine point nine percent of the time, the mortgage lender is going to choose foreclosure by advertisement (aka foreclosure by notice).

That is because it is a cheaper, easier way for them to foreclose by following this notification procedure. But as a result of choosing to foreclose by sending notices, the mortgage lender waives any right to collect on a “deficiency balance.” A deficiency balance, is any balance remaining on the mortgage after the sales proceeds from the foreclosure sale are applied to the mortgage balance. If the mortgage lender forecloses by advertisement, they are waiving any right to collect on that deficiency balance.

In exchange for making that foreclosure process easier for the mortgage lenders, MN requires the mortgage lenders to waive any rights to hold the homeowner responsible for that deficiency balance. The real premium that the lenders are looking at in this foreclosure situation is they want to make it as streamlined, inexpensive and easy as possible. Under the foreclosure by advertisement process, the first notice that is going to go out is what is called the pre-foreclosure notice. That is a letter from a law firm, and there are a number of law firms in the Minnesota twin city’s metro that handle many of these foreclosures. They’re called “foreclosure mills”, and they specialize in making sure that the notices are appropriate according to the statute.

The first legal correspondence you are going to receive is this pre-foreclosure notice. That is going to be from a law firm, and it is essentially going to say: “You’re behind on your mortgage by X number of dollars; you have to cure this amount in order for your mortgage to be out of default. If you do not, the mortgage lender is going to accelerate the balance of the mortgage, and move forward with the foreclosure process.” If the next thirty days comes, and you have not been able to “cure the default” (i.e., pay the amount that you are behind on) then you are going to get a foreclosure notice.

The foreclosure notice is going to say something to the effect of “You have not cured the default on your mortgage, we have accelerated the balance to the mortgage. The full amount of the mortgage is now due, and attached is a notice of foreclosure sale.” That foreclosure sale date will be set for the next four to six weeks into the future, because under the law, you are required to get at least a four week notice of the foreclosure sale date. At that point, if you want to save your house, you have to begin working on a plan, if you haven’t already. You want to make sure that you have a plan implemented before the date of the foreclosure sale, because once the foreclosure sale date happens, your home has been foreclosed and your options become very limited at that point.

In Minnesota, the foreclosure does not mean you have to leave the home immediately on the day of the foreclosure sale. Under Minnesota law, you have what are called “redemption rights.” After the foreclosure sale date, you have another six months to remain in that house in order to redeem your mortgage. That means essentially to try to find some kind of alternative financing, or perhaps you have a rich uncle who is going to buy out the old mortgage, and then you can keep the house. Obviously, it very rarely ever happens, but the positive aspect is you get to stay in the house for another six months, before you have to make your next move.

When you fall behind on your mortgage payment you have a deadline to get something figured out. Bankruptcy can help many people get more time to resolve the foreclosure. If you need more time, whether you file chapter 7, or 13, the bankruptcy filing is going to stay the foreclosure sale, but the key component is you must file your bankruptcy prior to the date of the foreclosure sale. The reason it stops the foreclosure sale, is because foreclosure happens under Minnesota state law, and bankruptcy is federal law. Federal law preempts state law. Under the bankruptcy laws, all collection activities from your creditors must cease as of the date your case is filed. That includes the foreclosure sale as well.

The bankruptcy will stop the foreclosure sale. If you filed chapter 7, you have an extra three months to work something out. Otherwise, the mortgage lender will restart the foreclosure process and start that new timeline for the new foreclosure sale. A much more helpful tool for many people rather than just getting an extra few months to delay the foreclosure is a chapter 13 bankruptcy.

A chapter 13 not only stops the foreclosure sale, but you can arrange a payment plan that binds the mortgage lender, over the next 3 to 5 years so that the homeowners can make payments to the court in order to cure the default. That can be a very powerful tool, because you can take up to five years to pay off the months you were behind on. Every month there is a new mortgage payment, you make that mortgage payment, and then by the time you exit your chapter 13, you are no longer in default. There is no more foreclosure sale and you are able to live in and continue paying the mortgage on the house.

Chapter 13 can be a very powerful tool, and if you have been trying to work with your bank and they are not working with you, and you have a foreclosure sale date looming, bankruptcy is definitely an option to look into.

For more information on Remedying Foreclosure In Minnesota, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.


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