How to stay in your home for the maximum time after a foreclosure. Use bankruptcy, HAFA, and cash for keys!
February 12, 2011 Leave a comment
(For the current state of the foreclosure crisis see this blog: http://bit.ly/JGU1dZ ).
There are a number of thing you can do to remain in your home for the maximum amount of time after a foreclosure has been filed against you but the first thing you do when you get behind on your home mortgage payments is just wait. As I reported in a previous blog, the banks are now slowing down in their processing of foreclosures.
This is good for you though if you are in a situation where the bank should be foreclosing on you because you are more than three months behind on your mortgage payments. At this point you should continue to reside in your home and wait for the bank to make a move that you can respond to. No one can oust you from the home you own unless they file a foreclosure against you so wait on it until it comes. When it does it will come with a NOD.
In California you will get a Notice of Default (NOD) as the first step in a foreclosure. This just means that the bank has begun the legal process and it will take 110 days before there will be an actual sale of your home. This is when you file for a chapter 7 bankruptcy. (Chapter 13 issues are more complicated). File the bankruptcy the day before the sale date and a “stay” will automatically be created. The stay will prevent the bank from taking further action and you will get the maximum time to remain in your home. A bankruptcy will give you the added advantage that your credit card, medical, and personal loan debt will be wiped away leaving you debt free.
The bank will respond to your bankruptcy filing with a “Motion for Relief from Stay” to get the bankruptcy stay lifted so the bank can proceed with the sale of your home. They could file this motion right away but in some of my cases it takes them another five weeks just to file this document. It then takes around another thirty days (sometimes it’s quicker) to get it granted. Now the bank will get another sale date and sell your home on the new date.
Once the home is sold you still cannot be thrown out in the street so don’t worry. The new owner has to file an Unlawful Detainer/eviction action to remove you. You begin now to negotiate with the bank or the new owner for cash for keys. It is in the new owner’s best interest to give you the cash. Remember that they don’t want to file an eviction because of the expense and time involved. Many of my clients get around two to three thousand dollars in cash for keys and many get two or three more months to remain in the home.
But don’t forget the short-sale! A foreclosure sale on your credit will prevent you from getting a FHA loan for the next five to seven years! Bankruptcy will only stop you from FHA loan eligibility for two years so it’s not nearly as bad on your credit as a foreclosure sale is. A short sale avoids the foreclosure sale if you can get the bank to agree to it. Banks do want to allow these short sales so with a good realtor it’s usually not a problem. The short sale will free the bank from the hassle and expense of a full foreclosure sale which would leave them with another piece of real estate that they don’t want.
Get a realtor who does short sales and he or she will explain the process. Basically you will be offering the bank the current market price for the home and not what you owe on it. The bank will settle for this and the realtor will negotiate his or her fee with the bank. It will cost you nothing. It is unlikely that the new buyer will give you cash for keys though to move out but there is a HAFA short sale government program that can pay you $3000. HAFA stands for Home Affordable Foreclosure Alternative and it allows for you to get the $3000 for relocation costs. Check with your realtor about the possibility of getting this money in the HAFA government program.
So there are a number of strategies to remain in your home for as long as you can and maximize your cash when you leave and save your credit as much as you can. Remember that no one can throw you out or remove you in any way. A foreclosure must be filed and an eviction must be further filed even if your home is sold at a foreclosure sale. Only then can a Sheriff remove you but no one from the bank or any mortgage loan company can remove you with out these court actions. So take heart, take your time,and maximize you advantages!
I am a bankruptcy attorney practicing bankruptcy law in San Diego. Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com. Or call my office for a free consultation at (619) 702-5015. Call now for free credit report and analysis! If you or someone you know may need to file a bankruptcy then please get my FREE E-BOOK: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” by e-mailing me at email@example.com.