Foreclosure is something that occurs after a homeowner has missed multiple mortgage payments. Working with a Florida bankruptcy attorney helps you avoid foreclosure and make the smartest choices when it comes to bankruptcy and homeownership. Can you file bankruptcy and keep your home? Absolutely, but it’s not always as simple as it seems.
Here’s what you need to know.
In general, lenders assume that once a person has fallen behind by several payments and has taken no other action to resolve the issue will be unable to catch up. After all, if they couldn’t afford one monthly payment, where will the money come from for two or more past-due payments?
The good news is if you’ve fallen behind on your debts, you have options. But not all of these options protect ownership of your home. Here’s what you need to know about how filing for bankruptcy affects your home and how bringing your payments current might not be enough to protect your home from the bankruptcy court.
Bringing Your Mortgage Current
First, it’s important to understand what it means to be “current” on your mortgage.
When you’re current on your mortgage, it means you’re up-to-date on the amount due each month, as well as any penalties and fees your lender has added to what you owe. If you’ve fallen behind, you can gain full reinstatement by paying everything you owe and continuing to pay what you owe in the future.
Full reinstatement is preferred by lenders because it saves them time and money. It means they can continue to collect on what you owe without dealing with court fees or putting a loan at risk of discharge. Because of this, many lenders offer partial reinstatement to help you avoid foreclosure. For example, paying half of your missed payments might result in partial reinstatement.
Ask Your Lender About a Payment Plan to Bring Your Loan Current
Additionally, some mortgage lenders offer payment plans. This allows you to add a portion of what you owe in past-due payments and fees to your original monthly payment amount until your loan is current.
For example, let’s say you owe $3000 in back payments, penalties, and fees. Your usual monthly mortgage payment is $1200. If you pay $1400 a month, you’ll have paid off your past due amount in 15 months.
Finally, some lenders offer a temporary indulgence option that allows you to catch up on past-due payments if you have a windfall of money headed your way.
For example, if you’ve recently been named as an heir in the estate of a deceased loved one and you know you’ll receive a sum of money large enough to cover your past-due payments, your lender might extend you the option of paying once you receive that money. In most cases, homeowners have 30 days to bring the loan current.
How Will I Know My Home is at Risk?
Mortgage loans are delinquent after 30 days elapse from when payment was due.
Before foreclosure proceedings can begin, the lender must notify you and give you a chance to discuss your options for bringing the loan current. From the point of contact, the lender must wait an additional 30 days before filing the 90-day notice of default. Following that, they must wait at least 90 days to give you a 20-day notice of trustee sale. This is the official date your home will be put up for auction. You continue to have the option of reinstating your mortgage loan up to five days before the auction date.
As scary as this is, it gives you a significant amount of time to improve your situation. This is the case whether you’ve filed for bankruptcy or not. From the date of your first missed payment, you have at least 165 days to bring your loan current. In cases with a less aggressive mortgage lender, you’ll have even more time.
For some in dire financial straits, this time makes no difference. But for many, it’s enough to create an arrangement that allows them to bring their loan current.
Several Options are Available
In addition to bringing your loan current at least five days before the auction date, homeowners might also be able to avoid foreclosure via refinancing, modification, or selling their home via short sale. Obviously, like your other options, selling your home doesn’t help you retain ownership of it. However, it can help you avoid increased financial problems.
The good news is, being assertive about your mortgage loan, even if you’ve fallen behind, prevents you from losing your home when you file for bankruptcy. If your mortgage loan is current, it’s highly unlikely it will be taken from you. Still, it’s important to work with an experienced attorney when filing. This ensures your home is properly protected and that a mistake doesn’t lead to unexpected consequences.
To learn more about how bankruptcy affects your mortgage or to speak to someone about retaining ownership of your home when you file, contact the Law Office of Robert M. Geller at 813-254-5696 to discuss your case.