What Does Foreclosure Really Mean?
Having practiced law for 47 years, I have learned that the word “foreclosure” means many different things to many different people.
So, how would I define “foreclosure”? Let me first say that when I talk about foreclosure, I am talking about my understanding of New Jersey foreclosure law. Therefore, if you're facing foreclosure in any of the 49 other states, you'd better check the foreclosure laws in that state, because they could be very, very different than the laws in New Jersey.
New Jersey is what they call a judicial foreclosure state. If you don't pay your mortgage on time in New Jersey, and the mortgage company wants to legally deprive you of your ownership rights to your home, that mortgage company is going to have to follow a rather strict, long, detailed, and time consuming process before they will be able to successfully do that. And the good news is that you can fight them every step of the way.
Foreclosure is more than just one single event. Foreclosure is a process, and the truth is that in New Jersey the process can take well over a year, if you exercise your legal rights as the process progresses. Of course, in order to exercise your legal rights during the process, you have to understand your legal rights, and you have to understand how the process works. That's what my goal is – to teach you what your rights are, and to understand how the foreclosure process works.
Interplay Between Foreclosure and Bankruptcy
It will also help if you understand a little bit about how bankruptcy works, because you might decide to file for bankruptcy at some point during the foreclosure process, for a variety of legal reasons.
Many people have many misconceptions about how bankruptcy works, and whether bankruptcy is a good thing or a bad thing. As an attorney who has represented well over 25,000 bankruptcy clients over the years, I certainly have my opinions as to whether bankruptcy is going to be beneficial or detrimental to each individual client whom I counsel. If I feel that bankruptcy is going to be a positive life changing event for my client, I will usually say something like this to him/her:
“Bankruptcy is a very powerful tool for people who are facing serious financial and emotional stress and distress, and bankruptcy can be a really beautiful blessing for you and your family. I believe that smart people use the power of bankruptcy to shift the balance of power in their favor. Instead of feeling like a victim with no control over anything, you can take control, and the creditors will have to back off and leave you alone. You would be smart to exercise the legal rights that the federal government has given to you, and when you do exercise those legal rights, you can get complete protection from those bill collectors.
“You have power because you can stop money lawsuits against you, you can stop mortgage foreclosure lawsuits against you, and you can either stop or delay the ability of the mortgage company to take your property. You can also stop tax lien holders who have paid your real estate taxes and are now trying to take your home away from you.
“And there's a lot more. You can stop wage garnishments, you can have your money released from a frozen bank account, you can stop vehicle repossessions, and you can usually get back any vehicles that have been recently repossessed, as long as you act quickly.
“You can also wipe out your credit card debts, personal loans, medical bills, surcharges on your drivers' license, legal bills, and a whole lot more. And if that isn't enough, well, after a bankruptcy case has been successfully completed, many people can often get their credit back and get mortgages, car loans, and credit cards again.”
In another blog we will demonstrate how bankruptcy, when properly used, can be a powerful tool that a person can use to delay and stop the foreclosure process. When used properly, bankruptcy can be a beautiful blessing to a person who has the ultimate goal of saving their home, catching up on their mortgage arrears, and starting to make their regular mortgage payments on time every month thereafter.
How Many Mortgage Payments Can You Miss Before the Mortgage Company Can Legally Sue You?.
Don't be afraid that you are going to lose your home just because you can't pay one or two mortgage payments on time. In New Jersey, the mortgage company has to send you notice that you are behind on your payments, an at the initial stages, the mortgage company has to give you an opportunity to catch up on your missed payments. During the Covid crisis, many mortgage companies have been much more liberal and flexible with borrowers who have challenges making their payments. So I would normally suggest something like this to a client who has been having trouble making their mortgage payments:
"Right now, during this pandemic, mortgage companies have instituted several programs to help people who are having trouble making their payments on time. So if you feel comfortable doing so, call your mortgage company and ask them what assistance they can offer you. You might be pleasantly surprised at what they tell you. I happen to know that many mortgage companies are granting payment forbearances for 3 months, 6 months, and even 12 months, and they say that it will not hurt your credit or result in any late charges or penalties, even if you don't make one single payment during the forbearance period.
And they also say that once the forbearance period is over, they are going to try to work with their customers to figure out an arrangement that would give them the opportunity to save their home without creating an undue hardship on them. They might even put the 12 months arrears way ahead at the maturity date of the mortgage, or they might offer you a fair and reasonable mortgage loan modification.They might even lower your mortgage interest rate and they might also lower your monthly mortgage payment. If you don't feel comfortable calling them yourself, I'll be happy to do a three way call with the mortgage company and give you guidance as we speak to them."
So the first rule is, "If you can't pay your mortgage payments on time, don't bury your head in the sand and don't avoid taking phone calls from the mortgage company representatives if they call you. Also, don't ignore their letters. Instead, be proactive, don't be afraid, and get in contact with your mortgage company. You could very well be very pleasantly surprised at how receptive and responsible they are when they speak with you. They may have all sorts of helpful programs available to you that will help you totally avoid the foreclosure process."
Now what if you have tried your best, and you just can't work out a favorable and feasible plan with your mortgage company, well then at some point you are going to get a letter entitled "Notice of Intention to Foreclose". This letter will officially make you aware that you are several months behind on your mortgage payments, and that if you don't catch up, you are probably going to have a lawsuit filed against you in the near future. That lawsuit will be entitled a Foreclosure Complaint. At some point in the future you will be officially served with a legal document which has a lot of legal type language in it, and you might be too scared to read it. And if you do read it, you still might not understand exactly what everything means.
Here is what is important to know once you get served with the Foreclosure Complaint:
An attorney for the mortgage company has filed a lawsuit against you.
This is serious, and you shouldn't take this lightly if you want to keep your home or other property. Don't ignore the lawsuit, and its probably a good idea that you quickly call and speak with an attorney who knows how to defend people that are being sued for foreclosure.
Don't waste time. You have to act quickly. Those legal papers say that you only have 35 days from when you were served to take action to contest the lawsuit. If you don't contest the lawsuit, you are going to make things pretty easy for the mortgage company. They are suing you because they want to take your property away from you, and if you do nothing at all, and if you don't contest the lawsuit within the 35 days you are being given, don't be surprised when you get a notice of a sheriff's sale on your property.
One of the purposes of the lawsuit is to make you catch up on all of the mortgage payments you have missed, pay interest charges, late charges and penalties, and pay some attorney fees and court costs that the mortgage company has incurred.
If you don't make all of these payments, or if you don't make a deal with mortgage company to catch up on what you owe them, then the ultimate purpose of the lawsuit becomes to deprive you of any and all rights of ownership you have in your home or other property. This means that if you don't do anything, at some point in time you can pretty much be sure that your property is going to be legally taken away from you.
How is the property taken away from you? Well, the most common way is that eventually your home or other property is set up to be sold at the county sheriff's office. This procedure is called a sheriff's sale, and it is an open to the public bidding process, where pretty much anyone can show up and bid on your property, which eventually will be sold to the highest bidder.
What if no one shows up at sheriff's sale or nobody bids? Well, usually the mortgage company will take over title to the property.
If the sheriff's sale takes place, you still have a slim chance to get your property back. There is what is known as a "10 day period of redemption" after the sheriff's sale has taken place. This means that you have 10 days from the day of the sheriff's sale to try to come up with a certain amount of money that will be determined by the sheriff's office to prevent the mortgage company or the buyer at the sheriff's sale from taking official title to the property.
One important thing to know is that this process of a sheriff's sale and losing your property as a result of a sheriff's sale can usually be avoided or stopped if you file a bankruptcy petition before the sheriff's sale is actually held. Filing for bankruptcy might very well give you up to 5 years to catch up on all the arrears, fees, and costs that you owe to the mortgage company.
Another important thing to know is that even if the sheriff's sale has taken place, you may be able to stop the transfer of the deed, and you may be able to change the redemption period from 10 days to 60 days by filing for bankruptcy before the 10 day redemption period expires. It gets a little complicated here, so if you have had a sheriff's sale and you are within your 10 day redemption period, and you still want to save your property, it would sure be advisable to speak to a qualified bankruptcy attorney right away.
People obviously want to know, "If I'm served with a complaint, how long will it take until my property is listed to be sold at a sheriff's sale." The answer to that question depends on a number of different things, and we intend to address those concerns, so please stay tuned.
But if you are actually in foreclosure right now, and you are concerned about how close you are to a sheriff's sale, I might be able to give you specific information once I learn more about your situation. This is important stuff to know, so why wait? Feel free to call me, Seymour Wasserstrum, at your convenience. I'd be happy to talk to you and do my best to answer your questions. No obligation whatsoever, and no charge for the the consultation.
DISCLAIMER: We set forth herein results that many people can obtain through a successful bankruptcy. This does not mean, however, that every client can obtain all of the results listed. Every client's case is individually analyzed on its own merits, and if you retain our office to represent you, we will advise you what results we believe we can achieve for you.