Learn about:

Chapter 13 Bankruptcy | Early Mortgage Payoff Refinancing | Loan Modification | Short Sale | Predatory Lending Litigation | Deed in Lieu of Foreclosure | Forbearance Agreements

There are numerous ways of avoiding foreclosure, or at least taking control of the situation to lessen the impact it has on your life. These include:

Filing Chapter 13

After detailed analysis of your situation, filing a chapter 13 to re-organize and consolidate your debts may be the best option. This is especially true when your Second Mortgage can be eliminated and allow you to stop house foreclosure. In California, filing for Chapter 13 debt consolidation is a powerful and legal way to stop the foreclosure process immediately.

Additionally, there are certain debts that may be dischargeable in Chapter 13 that cannot be eliminated under Chapter 7. For example, Chapter 13 will stop all interest and penalties being levied by the IRS, and might even be able to eliminate some IRS debts.

The Chapter 13 plan will be designed to keep what you want and pay as much as you can afford. After a period of 36-60 months, any unsecured debts included in the plan that you have not been able to pay off are completely eliminated.

Sometime our clients reach us too late in the foreclosure process and we file a Chapter 13 in order to stop house foreclosure and buy time to exercise any other viable options, including Loan Modification.

Timing is everything during a financial crisis. The more time we have the better we can prepare and more options are available.

Short Sale

Following a decline in property value, a short sale can stop house foreclosure in California. A short sale occurs when the lender agrees to accept a sale price of the home at fair market value, rather than the full outstanding balance on the mortgage.

A short sale is a viable way of avoiding foreclosure because the lender agrees to take a loss and write it off. This can stop mortgage foreclosure and avoid the negative impact on your credit. It also gives you an agreement to follow, with a predictable date to vacate the premises, rather than waiting for an eviction notice to be served by sheriff’s deputies. With your credit left mostly intact, you will be in a much better position to obtain another residence, either by purchase or rental.

Why would a lender agree to a short sale? The foreclosure process can be expensive and slow for a lender, compared to a short sale. A short sale also helps them avoid the publicity that comes when they are known for a large number of mortgage foreclosures. No lender wants to be the leader in house foreclosure, which implies they made bad loans to begin with.

A short sale can be a complicated process, but very beneficial under the right circumstances. There may be tax implications - the amount that the lender writes off as a loss can be attributed as a ‘gift’ or as income to the homeowner, and therefore taxable. However, if the owner takes a loss on their investment in the property, that will offset the income attributed to them.

As you can see, it’s important to seek professional advice to pursue this option. Contact our bankruptcy attorney, and we can advise you on Foreclosure Options that are right for you.

Deed in Lieu of Foreclosure

If it appears there is no way to stop house foreclosure in California, the Deed in Lieu of Foreclosure allows you to transfer title on the property over to the lender and be relieved of all or most of your personal indebtedness associated with the loan. This option for avoiding foreclosure offers several advantages to both parties:

• Avoids a formal foreclosure proceeding.

• Prevents public record filing, causing less harm to your credit record

• Eliminates foreclosure costs and legal fees for the lender

The process is complex, requiring projections of the future home value and the fair market value. It also means we must convince the lender to stop foreclosure sale because although you can’t afford to make mortgage payments now, you didn’t know this was going to happen when you took out the loan. Otherwise they may allege mortgage fraud, and cause even bigger problems for you.

Forbearance Agreements

BEWARE of forbearance agreements! We mention this “option” for avoiding foreclosure first, because the lender will often present it as an alternative to stop foreclosure sale.

In fact if you have real financial problems, a forbearance agreement is little more than a way to postpone foreclosure. It is often promoted as a chance to catch up on your payments – but with stricter terms.

The lender often requires a huge lump sum (which you may not have) before they will agree to stop mortgage foreclosure. Then if you miss any subsequent payments, the terms of the agreement usually permit more immediate action, making it harder for you to stop foreclosure. In California, this is just a way to squeeze more money out of a homeowner, under the guise of a workout plan. Very rarely is it a viable option for the borrower.

As with all legal options, you should seek qualified legal advice to stop mortgage foreclosure. When excessive debt is causing problems in your life, Contact our bankruptcy attorney for a free consultation to explore options that can get you back on track.

NOTE: Your individual circumstances may permit you to keep your house. Contact the Nader Law Firm to explore ways to stop loan foreclosure with a loan modification, or pursue lender litigation (Predatory Lending).