Foreclosure can be one of the most stressful events a person or family may ever face. Maybe you’ve lost a job or your income has declined and your mortgage payment isn’t affordable anymore. Maybe your home loan has an adjustable interest rate and you just can’t afford to make the increased payment. Or maybe you are behind on paying real estate taxes and you’ve run out of time to pay up. If you’ve defaulted under the loan contract, you are at risk of a foreclosure.
Most people don’t understand the foreclosure laws, procedure, or the timeline involved and this only leads to more worry and the potential waiver of important rights.
But it doesn’t have to be this way.
Important Information About the Foreclosure Process
Default: Your mortgage creditor may not foreclose on your home or real estate if you are not in default under the contract (promissory note and deed of trust). And so if you’ve timely cured past due arrears or resolved the default at issue, the mortgage creditor (mortgagee) may not foreclosure.
Notice of Default: It’s common for mortgagees to send a notice of default to the borrower if a default occurs, giving the borrower an opportunity to cure the default before accelerating the note and proceeding with foreclosure. But whether or not the mortgagee is obligated to send this notice to you and how much time they must give you to cure the default is dependent on your contract terms and the type of mortgage loan that you have. Read your loan documents and read your mail from the mortgagee so that you’re aware of this timeline and opportunity to resolve the problem and avoid foreclosure. (And be sure to update your mailing address with the mortgagee in writing if you’ve changed it. Not having received the notice of default or foreclosure notice because of a change of address is not a defense to foreclosure if you haven’t updated your address with the mortgagee.)
Acceleration: Mortgagees must give a borrower notice of the acceleration of the debt before the borrower cures the default in order to proceed with foreclosure. Once the mortgagee accelerates the note, the entire balance of the loan becomes due and must be paid in full in order to prevent a foreclosure. But there are some events that will prevent a foreclosure sale from occurring despite acceleration, at lease momentarily.
1) If the mortgagee realizes that it made a material mistake that will compromise the validity of the sale, it will cancel the sale. (Don’t hold your breath for this one though…)
2) The mortgagee and borrower may negotiate an agreement to resolve the default and cancel the foreclosure sale but any such agreement between mortgagee and borrower must be in writing, supported by valid consideration, and completed before the sale occurs. (This is usually very difficult to accomplish in the short timeline of a foreclosure.)
3) If the mortgagor (the owner of the real estate) dies, under certain circumstances the mortgagee must postpone a foreclosure sale by 6 months (moratorium).
4) If the mortgagor is in active military duty, the mortgagee must post a foreclosure sale; the duration of the delay depends on the circumstances.
5) If the borrower files a bankruptcy case, specifically a Chapter 13 Bankruptcy that imposes the automatic stay, before the foreclosure sale occurs, then the sale must be cancelled. The Chapter 13 Bankruptcy will give you time to cure arrears and bring your mortgage current again.
Redeeming Your Real Estate After Foreclosure
There are two approaches to recovering your property after a foreclosure has occurred: via 1) statutory right of redemption and 2) equitable right of redemption. Both require payment of the debt in full along with all costs incurred, but whether either right is available to you depends on your actions and the underlying circumstances.
Statutory redemption requires that you serve notice of your intention to redeem the property to the foreclosure trustee at the sale or within 10 days before the sale date. The mortgagee must be the purchaser of the property; if any third party buys the property at the foreclosure sale, you will not be allowed to redeem (or buy it back). But if the mortgagee does purchase the property, to successfully redeem by this method, you must purchase a bond, file it, and have it approved by the appropriate court within 20 days after the sale date. Then you must pay the debt, costs, and legal expenses in full within 1 year after the sale.
Redemption in equity only becomes available if you can prove that there was an irregularity or unfairness in the sale that makes the sale voidable. This requires the filing of a lawsuit, proving your case for the equitable redemption of the property, and an injunction by the court to prohibit further transfers or actions against the property. This will also normally require a bond. If you are successful, the court will set a deadline within which you must pay the debt plus costs and legal expenses in order to recover title to the property.
If these sound like uphill battles, you’re right. If a person could afford to do either of the above, they probably wouldn’t be in this situation in the first place.
But there is a more feasible, realistic way of stopping a foreclosure sale and resolving the default.
Chapter 13 Bankruptcy Laws Stop Foreclosure
There are laws that have helped millions of Americans stop the foreclosure of their home and get back on track with their payments – The Chapter 13 Bankruptcy laws.
The Chapter 13 bankruptcy case imposes an automatic stay the moment that the case is filed which prohibits activity against you and your property, like foreclosure.
- It also gives you, the homeowner, a chance to pay the past due amounts over time, rather than in one quick, lump sum as required in a foreclosure.
- And the Chapter 13 discharges unsecured liability that is not required to be paid, making it easier to budget for the important things, like your home loan payment.
- In some circumstances, Chapter 13 gives the homeowner the chance to completely eliminate junior mortgages or liens on their home. See my article on undervalued homes.
Choosing the right attorney is critical to the success of your case. Take the next step towards your fresh start and call me, Attorney Nancy Martin, today at (314)721-2525 or contact me online to schedule your free initial consultation.
I offer appointments at the office during regular business hours and conduct weekend and evening appointments upon request.
Nancy Martin is a St. Louis, Missouri attorney and consumer bankruptcy lawyer who helps people file for Chapter 7 and Chapter 13 Bankruptcy relief. To find out more about bankruptcy and other debt relief alternatives, contact us online or by phone at (314) 721-2525. The office is located at 150 North Meramec Avenue, Suite 400, St. Louis, Missouri 63105.
We help people in St. Louis, St. Charles, Chesterfield, Ballwin, Creve Coeur, Maryland Heights, Ladue Manchester, Kirkwood, Webster Groves, Wildwood, Bridgeton, Fenton, Eureka, Ellisville, Des Peres, Clarkson Valley, O’Fallon, St. Peters, Clayton, Olivette, Warrenton, Florissant, Hazelwood, and Frontenac. This includes the municipalities within St. Louis County, St. Charles County, Jefferson County, Franklin County, Warren County and Lincoln County.