How do I stop or postpone the foreclosure of my house?
In general, you have 4 options in order to delay the date of the foreclosure sale and which one you choose depends on what you wish to accomplish, the first 3 I’ll mention assume you wish to keep the house, the last option assumes you wish to let the house go, but stay in it as long as possible:
Attempt a loan modification with the lender.
This is if you wish to keep the house. By beginning this process, the lender should put the foreclosure sale (aka “sheriff sale”) on hold while they review your file. However, there is no guaranty that they will delay the sheriff sale or that they will modify your mortgage. In addition to the lack of certainty, the modification process can be frustrating – having to send and resend the requested information while the lender drags its feet in reviewing your file and determining whether you qualify for their program. A good starting point if you’re interested in modification is www.makinghomeaffordable.gov.
You could file chapter 13 bankruptcy (ch13).
A ch13 is a repayment plan, in which the court consolidates all of your debt (including back mortgage payments) and you make monthly payments on the debt for 3-5 years depending on what you qualify for. Once you file the ch13 (which must be before the date of the sheriff sale) the ch13 freezes the foreclosure process and you can make payments on the back mortgage payments and bring your mortgage current over the 3-5 year life of the ch13 payment plan. In ch13 you must pledge your “disposable income” which is the income left over after you pay your monthly living expenses. You do not have to pay 100% of your unsecured debts (credit cards, lines of credit) but must pay 100% of the back mortgage payments. This option only makes sense if a) you wish to keep the home; and b) you can afford to pay your back mortgage payments over 3-5 years.
The state of MN has a foreclosure postponement process.
In MN, after the sheriff sale date, you have 6 months to remain in the house. This is called the redemption period. Under the foreclosure postponement process, you file an affidavit with the county property records department and serve copies on the sheriff and the law firm handling the foreclosure and you can push the date of the sheriff sale back 5 months. However, as a result, once the “new” sheriff sale date passes, you will only have a 5 week redemption period. This option only makes sense if you are trying to keep the home and is typically used to give the homeowner more certainty that the foreclosure won’t happen while they pursue a modification with the lender.
You could file a chapter 7 bankruptcy (ch7).
First, you must qualify for ch7 – which is based on your income. The ch7 would freeze the foreclosure process (again, you must file the ch7 before the sheriff sale date), but after the ch7 is over (approx. 90 days) the lender can restart the foreclosure process. In addition, the lender can make a motion during your ch7 to ask the court’s permission to allow them to move forward with the foreclosure. This option only makes sense if a) you do NOT wish to keep the home; and b) you can qualify for ch7. Also, the ch7 will only give you an extra 2-4 months in the house. This option makes sense if you have a second mortgage on the house as the second mortgage lender can sue you on the balance due on their loan after the foreclosure. The bankruptcy shields you from liability on this “deficiency balance.”
Note that all of the options require you to take action before the date of the sheriff sale. Also, depending on which course of action you choose, it may take weeks to execute before the sheriff sale. Call Atlas Law Firm to setup a free consult to discuss your options in more detail.
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