Seven Great Ways to Stop, Avoid, or Delay a Foreclosure
March 5, 2021
Here are seven examples of how people can save their property from foreclosure and sheriff's sale.
1) You can get a loan modification from your mortgage company. Here's an example. Let's say your mortgage payment is $2,000 a month, you missed 10 mortgage payments, and you owe $20,000 in arrears. If the mortgage company is willing to give you a modification, they could do something like this: they take the $20,000 you're behind, and they say, “Don't worry about that $20,000 for now. You can pay us back that $20,000 many years into the future. For now, we'll consider you up to date, and we're going to make your mortgage payment a lot more affordable.” If your mortgage payment was $2,000 a month, they might reduce it to $1,500 a month. If your interest rate was 6%, they might reduce it to 3.5%. If you had 20 years left on your mortgage, they might increase the time to 30 years.
Sometimes this is a good deal, and sometimes it's a bad deal. There are a lot of mathematical calculations that have to be considered to determine whether this type of solution will work best for you. Remember, if it sounds too good to be true, it usually isn't true. And if you think the mortgage companies are in business to be your friend and to help you, you might want to think again.
2) File an Answer to the Complaint that has been filed against you. Talk to a lawyer for more information about this. If you don't file an answer, you can lose the case quickly by default, because by not filing an answer, it is just like you have tossed in the towel and given up. You have forfeited your right to contest the lawsuit that was filed against you. Why would you just give up your legal rights just like that? It's surely not a smart thing to do. You have the right to contest the lawsuit and make the mortgage company prove the case against you. In New Jersey, a contested foreclosure could take maybe a year or so before the case came to trial. You also have the right to a mediation process while the lawsuit is pending, so you might very well be able to make a favorable deal with the mortgage company.
If you want to save your home from foreclosure, I would recommend that you most definitely file an answer to that foreclosure complaint. You have to be aware that there is a time limit involved here. You have 35 days from the date the complaint was filed against you to answer that complaint. I suggest that you don't do this on your own. At the very least, consult with a knowledgeable attorney, and if you decide to go forward without an attorney, check out the New Jersey court website at www.njcourts.gov.
Click on the Self Help Center at the top left. Go to the "Homes and Evictions" column and click on "Foreclosure." Next, click on "
Foreclosure Forms and Resources - then click on
How to File an Answer to a Foreclosure Complaint - This will take you to 14 pages of printed material which gives you step by step instructions as to how to file an Answer to the Complaint that has been filed against you. You must file your answer and pay a $175 filing fee no later than 35 days after you were served with the complaint. Read the instructions carefully - they are pretty much written in non legal type language, and if there is something you don't understand, you should probably call a lawyer to see if you can get a free consultation, and hopefully the lawyer can give you a helping hand.
3) You can save your home and other property by filing Chapter 13. Chapter 13 is a great way to save your home, and it will always work if you can do what you are required to do. You should be aware of the following rules that usually apply to Chapter 13:
When you file Chapter 13, it will generally stop the foreclosure process dead in its tracks. If your property has been listed for sheriff sale, the sheriff sale usually gets stopped. If a foreclosure complaint has been filed against you, the mortgage company attorney can take no further action on that case while you are protected by the Chapter 13 process. If the mortgage company has been calling you and writing to you about your mortgage arrears and harassing you about payment, all phone calls and written communications must stop.
In order to save your home, you propose a reasonable plan to cure your mortgage arrears. The Court can give you 5 years to make monthly payments and catch up on your arrears.
All of your other creditors will also be stopped cold. In other words, none of your other creditors can call you, harass you, send you emails, write you letters, etc.
The ultimate goal would be to wipe out all of the bills and have all of those debts forgiven by the bankruptcy court while you keep all of the property you own.
4) In a totally successful chapter 13 case, our clients keep whatever they own, including their home, their cars, the money in their bank accounts, their retirement plans, etc., and they legally wipe out all of their unsecured debts such as credit card bills, medical bills, personal loans, payday loans, surcharges on their driver's license, old income taxes, internet bills, utility bills, and lawyer bills. Those type of debts are totally forgiven by the Court.
Here's an example of how Chapter 13 works when you're behind on your mortgage. Let's assume that your mortgage payments are $1,000 a month. You are 20 months behind, and you file Chapter 13. In the future, you will be required to pay your regular monthly mortgage payments on time. As to the $20,000 you're behind, the court will give you 5 years to pay that back in a monthly installment plan for 60 months. Therefore, if you can make your regular monthly payments in the future and pay an additional payment every month for the next 60 months to cover the $20,000 of arrears, plus any additional payments that have to be made through the plan, you will save your house.
What if you can't make all of your mortgage payments and make a Chapter 13 payback plan work for you? Even if you don't have the money to pay back the arrears over 5 years, you can still take advantage of the Chapter 13 process. First, by filing Chapter 13, you can stop the foreclosure from going forward, and you can also stop a sheriff sale. Second, you can try for a loan modification as a part of the Chapter 13 process. Even if you tried for a loan modification before and were denied, you still could, in most situations, apply for a modification as a part of the Chapter 13 process under the supervision of the court.
4) Mortgage Loan Forbearance. During the Covid crisis, many mortgage companies have been offering homeowners a forbearance. At the beginning the mortgage companies were offering a forbearance for 3 months. Then after the 3 months passed, they offered a second 3 months forbearance. Recently, many mortgage companies have been offering a forbearance for up to 12 months. If you haven't yet received a forbearance or any other type of mortgage payment relief, and you'd like to see what your mortgage company has to offer, simply give them a call, and ask them if they have any program available that would help you save your home from foreclosure.
5) Can you do a short sale? Mortgage companies will often agree to a short sale, which means that they will let you sell your property for less than you owe to the mortgage company. Sometimes this is good, and sometimes it isn't. I don't normally recommend it to my clients. There are usually better options.
6) What if you could do business with a new mortgage company that is willing to make a deal with your present mortgage company that is beneficial for everyone?
Here's an example. Let's say your house is worth $150,000, but you owe $200,000 to the mortgage company. The mortgage payments are $2,000 a month, and you're $40,000 behind. If you can't come up with a solution, your house is going to be sold at a sheriff's sale.
What if we could introduce you to a new mortgage company that is going to deal with your present mortgage company, and they have a conversation something like this: the new mortgage company says to your present mortgage company, “Listen, you're never going to get $200,000 for this house. These people can't pay their mortgage, and if you foreclose, you know you're going to lose $50,000 or more on this property. You'll have to pay a whole lot of money to your lawyers, plus you'll have costs for the sheriff sale. Then when you finally get the property back, you'll have to pay people to fix it up and put it in good shape. You'll also have to pay real estate people to market the property, and you'll have to pay them commissions. Let's face it, you're going to lose a lot of money on this property. How about if we pay you $135,000 right now and we'll take this property off your hands?”
If the two mortgage companies make an agreement, the new mortgage company will transfer ownership of the property back to you and give you a mortgage for maybe $150,000. So, what does this mean to you? Well, you stay in your home, and instead of owing $200,000, you now only owe $150,000. Instead of paying $2,000 a month on your mortgage, you now get a new deal where your mortgage payment goes down to maybe about $1,700 a month.
This is a hypothetical example, but the mortgage company we deal with has a good track record, and they have indicated that on average they can save a homeowner about 35% on their mortgage.
7) CAN'T PAY YOUR REAL ESTATE TAXES? WHAT EVERY HOMEOWNER NEEDS TO KNOW.
Do you realize that you could own your home free and clear, without any mortgage, but your home could still be taken away from you if you don't pay your real estate taxes? We recently had a senior citizen come in with a challenge. He owned 3 homes without any mortgages at all. But due to unfortunate financial problems, he had been unable to pay the real estate taxes for 3 years. He owed about $40,000 in taxes, and his homes were worth about $300,000. Fortunately, he came to see me, because he could have otherwise lost his properties. All because he owed the township some real estate taxes. Does that seem like a fair law?
Well, the good news is that if you file for chapter 13 before you lose ownership of the property, the Court will give you 5 years to pay back your taxes, by paying monthly payments plus interest, and you should no longer be in jeopardy of losing your home for not paying your real estate taxes.
I hope that I have given you some choices and alternatives that you may not have been aware of. If you need to file for bankruptcy or seek other relief, I don't want you to feel ashamed or guilty. There is no shame in using the laws in this country to help yourself have a better life in the future. You deserve it!
If you owe a lot of money to mortgage companies and various other companies, I usually tell my clients not to feel badly for the creditors. They have probably made lots of money from you already, and they could probably care less about you personally. If someone files for bankruptcy or seeks other relief, that is not a surprise to the creditors. They know that many people are going to take advantage of the laws for their own benefit. Bankruptcy is in the United States Constitution, and if someone needs to file for bankruptcy, they are exercising their constitutional right.
I hope I have given you some choices and alternatives, and if you'd like some more information, of it you have questions you'd like to have answered, feel free to call me, Seymour Wasserstrum, for a totally free consultation, no obligation whatsoever.